Is a farm direct outlet for you?

The best way to evaluate whether direct marketing is for you is first to look at your personality. If your personality seems compatible with direct sales, then you might continue by evaluating market opportunities and the compatibility of your farming operation with the demands of direct marketing. You need to be outgoing and enjoy meeting and talking with people in a friendly manner. Farm direct customers want to feel welcome or they likely will not return. Personal interaction adds to the long hours that successful farm direct marketers put into their businesses. Are those long hours going to create conflict and stress in your life and the lives of family members and friends? Knowledge of production methods is critical in selling directly to consumers. These buyers want and expect high-quality products on a consistent basis. You must meet those expectations or sales will lag.

Consumers and regulators expect you to comply with applicable regulations on grading standards, weighing equipment, and food safety. There may be legal restrictions such as licensing, inspections, highway zoning and access, market orders, packaging and processing requirements, signing, or weights and measures rules. To avoid any pitfalls, be sure to contact your local government and state department of agriculture as a part of your market assessment.

It is important to consider how farm direct marketing fits into your overall business plan. A direct marketing business should complement your overall farming operation and not compete for land, labor, capital, and management resources. When selecting a method, consider personal preference, farm location, and the volume and nature of the products and services to be sold. In some cases, more than one method may fit your marketing plan.

• The generally lower price per unit for bulk purchases encourages sales for home processing.
• Some customers enjoy U-pick as recreation.

Disadvantages may include the following:

• U-pick operations may suffer losses from inexperienced pickers or from too few pickers to harvest the entire crop. (Two-income families have less time for U-picking despite the perceived recreational benefits.)
• You may have insufficient parking space.
• Your liability risk may increase due to the potential for accidents.

• You can improve facilities as volume and returns increase.
• As you gain experience and accumulate capital, you may wish to develop your roadside stand into a roadside market. Roadside markets typically sell both owner-produced products and products purchased from other sources.
• Roadside markets usually are open all year, so they rely heavily on wholesalers and brokers for supplies in the off-season. They may sell items other than produce, but successful roadside markets usually are identified with a rural environment and sale of "home-grown products." Roadside markets, like roadside stands, usually are located on or near the grower's property, which clearly associates them with rural farming.
  Operators of roadside markets frequently cite the same advantages for their operations as do roadside stand operators.

• In addition, roadside markets offer:
  The opportunity to expand the diversity of products offered for sale through purchases from wholesalers
• The possibility of retaining key employees year-round
• The possibility of offering cost-effective entertainment events such as musical performances, petting zoos, or displays
• The possibility that additional income from a year-round farm market may reduce or even eliminate dependence on income from off-farm employment

Disadvantages of roadside markets and stands may include the following:

The need for a strong retail background and experience
The need for capital for facilities and inventory, especially for a year-round market

Advantages of farmers' markets may include the following:

• Collective selling attracts more customers because of the convenience of having a variety of products and services in one place.
• Customers are drawn by the possibility of obtaining or ordering special items in large quantities for home processing.
• The markets provide excellent opportunities to improve farmerconsumer understanding through direct contact.
• Low-income or elderly urban residents who cannot travel to production areas may be among the most reliable customers of a farmers' market.
• Some farmers' markets are involved in the Federal Women, Infants, and Children (WIC) Program.
• Entertainment such as music or special events may be more affordable when costs are shared among a number of sellers.

Potential disadvantages of farmers' markets may include:

• Costs related to transportation and selling increase.
• There may be downward competitive price pressure because price comparison is easy and many buyers at farmers' markets are more bargain-conscious than customers who come to individual farm locations.
• Time away from production operations can reduce productivity. This problem is especially troublesome during the inevitable periods of slow sales at farmers' markets.
• Limited market days may put pressure on production schedules and contribute to insufficient volume sold.
• Most markets are not open year-round, so market locations can be in jeopardy if owners find more profitable uses for the space. Sometimes the use of municipally owned land reduces this risk.
  Obtaining competent market managers may be difficult.

Mail-order and Internet sales

Some growers have found that mail-order selling works well. Mail-order direct marketers sell everything from produce gift baskets to on-farm processed food products and Christmas trees. Destinations range from local to international. Growers like this form of marketing because it lengthens the selling season and expands the customer base.

Producers often develop mailing lists from contacts they make at on-farm selling operations or farmers' markets. You also can buy mailing lists. Often, using group catalogs or contacting buyers' clubs increases sales. In some cases, producers cooperate to prepare and send products.

The Internet provides a new mail-order opportunity. You can design a Web site by using a software package or by contracting with a professional programming service (Webmaster). The Web site would feature your products and services. Browse Web sites of other farm businesses to get ideas on how to design your own.

Most Web sites are on a commercial server and are linked to similar or complementary Web sites. If properly designed, a Web site is found easily by consumers using a Web search engine. When customers reach a site, they can view information, download it onto their own computer, print it, and, if the site is designed for it, place an order.

Often, growers include order forms on their Web site, which customers can fill out and submit, either electronically or by regular mail. Increasingly, customers pay for online purchases by entering their bank charge card number on an electronic order form. To use this method, you need to be able to accept credit card orders. The grower ships or delivers all orders in the traditional way.

Direct to restaurants

Selling directly to restaurants, like selling directly to consumers, eliminates one or two middlemen. By assuming traditional wholesaler functions, the grower assumes the associated costs, but can keep the potential profit that normally goes to the wholesaler. Often, chefs and restaurant owners are willing to make the extra effort to get high-quality and specialty items, but they demand the same consistent quality and service from the farmer that they can get from a wholesaler--broad product line, partial cases of product, clean produce, frequent delivery schedules, convenient ordering, and expert advice.

An effective relationship with a chef involves annual planning to help the chef learn which specialty products can be grown in the area and to help you decide what crops to plant for the upcoming season. You'll need to develop a product line broad enough to accommodate a group of restaurants and to justify the cost of delivery to each individual restaurant. Your service quality--e.g., product presentation, phone service, and delivery--must be excellent for a restaurant to justify reducing or dropping orders from its year-round produce wholesaler for the short, local growing season.

Restaurants often use the Web to market themselves and order supplies. By using the Web, you can set up "cyber" relationships with restaurant customers.

Frequently cited advantages for direct-to-restaurant sales include:

• A higher wholesale selling price
• A potentially higher net profit
• A possible outlet for specialty or unusual products
• More precise production planning

Frequently cited disadvantages for direct-to-restaurant sales include:

• The need for a high level of off-farm customer service
• Competition from wholesalers who have a year-round product line and sales staff
• The need for a broad product line
• Low per-customer sales volume

Community-supported agriculture

Community-supported agriculture (CSA), also called subscription farming, is another method of direct marketing. CSA is an arrangement between farmer and customers in which the farmer provides fresh produce all summer to a group of customers who have paid in advance. Usually, there is a weekly pickup day and time at the farm or a neighborhood location.

With CSA, members purchase shares of the farm's harvest and accept less if a crop is damaged or fails. This method differs from traditional market gardening, in which the grower accepts all of the risk.

Other methods of CSA may be found. For example, in some membership clubs, members pay a fee for the privilege of coming to the farm and picking produce when it is ready. The customers pay by the pound for what they pick. Although a membership fee is paid before the season, the farmer assumes all of the risks of crop failure.

In another scenario, members of a food buyers club pay an annual membership fee plus a per-pound fee for what they purchase. Members fill out a produce order each week, and the grower takes the food to a central distribution point for pickup.

There are many advantages to marketing through a CSA. For example:

• There is reduced risk to the farmer, as the customer shares in the risk of farming.
• Payments come before or early in the growing season.
• Produce is very fresh, often picked the day of marketing.
• Produce may be home delivered, taken to a central distribution point, or picked up at the farm.
• Produce usually is organically grown.
• The producer has a dedicated market before the growing season begins.
• Farmers can find secondary markets, such as roadside stands, grocery stores, etc.
• There is direct contact between the producer and the consumer.
• Customers may learn something of the farming ethic and how things are grown.
• The customer may help determine what is planted.
• The customer may provide some of the labor.

There also are disadvantages. For example:

• Growing a wide variety of crops adds complexity to the farm operation.
• The grower must develop a relationship with many customers instead of a few simpler wholesale
• marketing relationships.
• Some organic production techniques are less effective.
• The customer may not like the produce selection.
• Pickup may not be as convenient for customers as shopping at the local supermarket.

Wholesale Marketing

In the past 50 years, the fresh produce marketing system has evolved into a highly sophisticated and efficient marketing mechanism. From handling only a limited selection of locally produced seasonal items, it now markets a large selection of local, national, and international products. Improved transportation and communication systems, as well as uniform grading and packing standards, allow wholesale buyers to shop in various growing regions to find the product and price they desire. Farmers benefit from the increasing number of marketing opportunities. Consumers benefit from greater selection and lower prices.

• Office space
• Phone service and a recordkeeping system
• Packing equipment
• Cooling, storage, and loading facilities
• Skilled office personnel
• A skilled marketer, if you don't have the time or ability to do that job yourself.

Wholesale produce marketing might be best suited to experienced growers that can harvest, pack and ship significant volumes of standard product regularly.

Regardless of what type of marketing you do, you should analyze your individual interests and skills as well as the time you can spend marketing your product. Be sure to develop a marketing plan to help with plans for selling your products.

This publication is available in alternative media on request.

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