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MOF&G Cover Spring 2012
 

 


  You are here:  PublicationsMaine Organic Farmer & GardenerSpring 2012Distributor   
 How to Sell to a Distributor Minimize

By Melissa White Pillsbury

At the Maine Agricultural Trades Show in January, Leah and Marada Cook of Crown O’ Maine Organic Coop (COMOC) discussed what farmers need to know about selling to a distributor. They shared insights into the worlds of produce distributors in general and of COMOC in particular.

Is Your Product Legal?

First and foremost, your product must be legal to sell. Leah and Marada spend a lot of time educating producers about the rules and regulations for selling particular products. Producers should check with the Maine Department of Agriculture, the Maine Department of Health and Human Services, and the U.S. Food and Drug Administration – not with distributors – to learn about licensing, labeling and other requirements for selling products legally.

Don’t ask a distributor to sell a product that can’t be sold legally, even if you disagree with the way the product is regulated. For example, “We can’t sell raw cider. We just can’t do it,” said Leah.

Documentation Requirements

Selling through a distributor can involve more scrutiny than selling directly to the end user. The distributor will likely want documentation for a food safety plan and/or certification, including, at minimum, a water test showing that you have an appropriate source of water to wash produce; a certain amount of product liability insurance; and evidence of any claims you are making about your product (e.g., your organic certificate, if you are calling your product organic).

Invest in a Long-Term Relationship

Unless your product has a long storage life, no distributor wants a call after the product is harvested. Distributors can often accommodate unexpected surplus product, but the Cooks note that if farmers use distributors to “dump” excess product, neither the farmer nor the distributor will profit in the long run. Building the market for local foods depends on reliable supply. The farmer needs to provide the distributor with reliable availability information, which the distributor then needs to provide its customers. If the distributor cannot consistently fill orders, customers may not order from that distributor again. Farmers should build a relationship with the distributor and plan ahead to supply product.

The Cooks recommend talking to a distributor in the winter – not a slow time for distributors but a good time to plan for the next growing season. The volume of product a farm sells through a distributor may grow slowly or quickly over time, depending on how successful the relationship becomes for both grower and distributor. Generally, COMOC likes to start with new farm vendors on a very limited basis, typically taking several years before a supplier may grow thousands of pounds of produce to sell through them.

Good Communication and Timing are Critical

Communicate with your buyer as clearly as possible in order to meet everyone’s expectations. Be upfront about your product’s quality and quantity so that the distributor can respond appropriately. If the quality will hold for only a few days after the distributor picks up the product from the farm, your distributor needs to know this in order to get the product out quickly to end customers. If a crop isn’t ready to harvest when you originally expected, tell your distributor so that she can adjust the availability sheet and avoid disappointing customers (who otherwise may not order from the distributor next time).

Meet Quality and Safety Needs

After a distributor picks up product at the farm, the receiver may reject it at the warehouse if it does not meet quality or safety requirements. (It’s not the driver’s job to officially accept a product.) Distributors commonly visually inspect and measure the temperature of product arriving at the warehouse. Proper temperature indicates quality and safety for certain products. For example, regulations require that eggs be kept at 42 F or lower.

If a product isn’t as good as it needs to be when it arrives at the warehouse, or regulatory or safety requirements have not been met, it can be rejected, and, as Leah pointed out, “Most distributors will ship it back to you at your expense. Be really clear with your buyer about what you’ve got to offer.”

Pricing

Unlike larger distributors, COMOC begins the conversation about price with the farmer’s cost of production. Farmers should communicate clearly what price they need to get. COMOC is committed to making prices work for the producer if the farm’s cost structure is not too high.

Margins vary on different products. Marada asks herself, “How much legwork will I need to do to make that product successful?” and sets the margin accordingly. Before the growing season, distributors can give an expected price range for particular products based on previous years’ sales, but they can’t give an exact price until the time of sale. As a rule of thumb for produce, Marada said a good farm gate price is approximately half the retail price you might see at a Maine food co-op.

For a sustainable local food system, farmers must price their products appropriately across markets according to costs associated with selling to each type of market. For example, a farmer shouldn’t ask for the same price when selling to a distributor as when selling directly to a store. The distributor provides a service – delivering to the store – and the distributor or the farmer needs to pay for this service. Free delivery is not sustainable, said Marada.

Payment Terms

Unlike selling at a farmers’ market, growers aren’t paid immediately by distributors. With COMOC, “sometimes it takes longer to get paid than others.” Payment terms can range from 7 to 30 days or more and can sometimes be negotiated with the buyer. Talk about this up front with your distributor or wholesale buyer. If you cannot wait 30 days for payment, then a distributor may not work for you. Sometimes COMOC will “take a break” from a producer because the farm’s business structure can’t comfortably handle the payment terms.

Packing Standards

Ask distributors, “How do you need this packaged? What is your case weight or count?” Packing standards address several needs related to distributing produce, including the need to protect and efficiently handle the product and to present consistent product units to customers.

Distributors often need to handle a product three or four times before it reaches its final sales destination, so packaging must be durable. Leah says, “Salad ties on a 25-pound bag of carrots don’t work – they come off. And then we have to deal with dirty carrots scattered across the warehouse floor. Wire ties are a big deal.” She also warns, “Don’t put anything wet in paper packaging!!”

Produce that can be bruised or damaged easily must go in a waxed box. If the product will touch the sides of the box, use a brand new waxed box. If the product is bagged, COMOC will let you reuse a waxed box. Other distributors may have different requirements.

COMOC deals with lots of oddly sized boxes but is getting away from this to improve stacking and palletizing – necessary to move product around efficiently.

Bags or boxes must have uniform weights or counts for a distributor. Varied counts or weights are unmanageable for someone already distributing more than 150 products a week. If you’re selling bags of cabbage, every bag of cabbage must weigh the same. If you’re selling boxes of head lettuce, each box must have the same number of heads.

Packaging is a real cost when working with a distributor, so be sure to incorporate the cost of packaging in your price.

Labeling

When selling to a distributor, you must label your product with your farm name and a lot number that can be used to trace the product back to the field and day on which it was harvested. If a safety or quality concern arises, only that lot number, and not your entire product line, will have to be pulled.

Invoicing

Include an invoice or packing slip with the product when it’s picked up from the farm. Paper trails help eliminate mistakes. Ideally the driver checks the invoice or packing slip at pickup, but that’s not always the case. It IS checked when the product arrives at the warehouse. COMOC handles discrepancies between invoices and warehouse records case by case, but without a copy of your invoice, the distributor can pay only for what warehouse receipts show.

Rejections

Distributors’ customers sometimes reject product because it lacks quality. COMOC handles this situation on a case-by-case basis to determine who is responsible. Storage conditions at the retail location or distributor’s warehouse may not have been adequate, or the product may have been ready to turn when it left the farm. Tell your distributor if you know your product is questionable; with enough information, the distributor can try to get the product to the end customer before it loses value.

Sales

Ask distributors how they do business. Is your relationship with this distributor exclusive? Can you still sell directly to customers?

COMOC supports farmers doing their own sales and can deliver your product to your customers. The company would rather not compete with you or other distributors to sell your product. In other words, it’s better not to sell your product to COMOC if you’re selling the same product to one of COMOC’s customers yourself. Likewise, don’t sell your product to COMOC if you’re selling the same product to another distributor who also sells to COMOC customers.

Opportunities

COMOC is always happy to discuss new products you may want to sell to a new market or products available for an extended season. In the world of produce, you’ll benefit most by being able to supply a product when no one else has it. For example, snap peas were a surprise success for COMOC in the Boston market last year. Massachusetts growers have a short pea season; Maine’s is four weeks longer; so customers in Boston were happy to buy Maine snap peas at the price offered (while the same peas at the same price were not selling in Maine).

Final Word: Business Plans

When writing your business plan, look at the big picture for your farm, advised the Cooks. How will selling to COMOC or any distributor fit into your overall marketing plan, which you will refine and revise over time? Typically, small diversified farmers first market a small volume of many crops directly to consumers; over time they may grow a handful of products in larger volumes that are better suited for wholesale markets.


History of Crown O’ Maine

COMOC was started to address the need for a market for produce grown in Aroostook County. It aggregated product from Aroostook farms and transported and sold it downstate and out of state. Over the years the business evolved and expanded. It markets most of its products in Maine, sourcing from 160 vendors throughout the year and having at least 150 products on its availability sheet at any time, depending on the season. It trucks every day of the week, picking up from farms and delivering to customers – including many buying clubs. In the last three years, gross sales have grown from $300,000 to more than $1 million. For more information, see www.crownofmainecoop.com.

Melissa White Pillsbury is MOFGA’s organic marketing coordinator. You can contact her at Melissa@mofga.org.


  

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