Marketing & Sales 101 INFO SHEETHaving a clear marketing and sales strategy is important for your farm success. There are many issues to consider and many different channels to get your product to the final end-consumer.

This Info Sheet provides an overview of how to think about your strategy, how to choose the channels that will work for you, and – most importantly – make a profit!

At A Glance Choose Your Sales Channels Price Competitively Create Your Brand Be A Sales Person! Track Your Sales

Choose Your Sales Channels

In general, selling direct-to-consumers is the most profitable channel, since you keep the entire final purchase price. However, the larger your production volume, the more difficult it can be to move all of your product as it is harvested.

Selling through wholesale channels may seem appealing in that you can move a lot of product in one transaction, but there are administrative and regulatory costs/burdens, so – in general – for smaller farms that don’t have economies of scale, the profit margin is much lower and is often unsustainable.

Below is a graph created by the Sacramento Area Council of Governments (SACOG), which illustrates the balancing act farmers must make in choosing the best mix of sales: direct-to-consumer, to high-end wholesaler, or to conventional wholesalers.

For 20-acre farms selling: 100% direct-to-consumer,

net revenue was $100,000. 65% direct-to-consumer and 35% to high-end wholesaler,

net revenue was $40,000. 50% direct-to-consumer, 25% to high-end wholesaler, and 25% to conventional

wholesaler, net revenue was $4,000.

For 60-acre farms selling: 100% direct-to-consumer,

net revenue was $300,000. 65% direct-to-consumer and 35% to high-end wholesaler,

net revenue was $175,000. 50% direct-to-consumer, 25% to high-end wholesaler, and 25% to conventional

wholesaler, net revenue was $100,000.

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SACOG: Regional Planning in the Sacramento Region, 2012

Ultimately, choosing the right mix of sales channels (even if only one) should be based on sound financial planning and an understanding of your profit margins from each of your current channels. (For help with this type of planning, refer to the FarmsReach Business & Financial Planning Toolkit.)

On a more basic level, you should also ask yourself some easier questions as a general reality check:

To whom will I market? Why will the market want my product? How will the market know I have what it needs? What will I market? What do you want to sell that will also make the biggest

profit? Would it make sense to pool product with neighboring farms to gain access to

larger-volume markets? Are there already existing local marketing channels (for example, Buy Fresh Buy

Local) and/or a cooperative distribution coops I could join?

Refer to the comparison chart below.

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Farmers Market

CSA Farm Stand

U-Pick Agri-tourism

Restaurant Grocery Store

Institution Distributor

Common Risks

Weather dependent; low customer turn-out; price competition; leftover unsold product

Farmer commitment upfront; may be risky for a beginning farmer

Low customer turn-out; liabilities of people on the farm

Low customer turn-out; weather dependent; liabilities of people on the farm; lost crop in field

Low customer turn-out; weather dependent; liabilities of people on the farm

Inconsistent orders; high expecta-tions; buyer back-out; slow to pay; unpaid debts

Inconsistent orders; buyer back-out

Inconsistent orders; buyer back-out

Distributors call the shots; inconsistent orders; buyer back-out

Prices & Profit

Prices vary; Profits can be highest among channels; high labor costs; better markets than others

Price similar to whole-sale, but profit is generally higher

Prices vary, but high profit potential; location is a big factor in price

Prices vary, but high profit potential; location is a big factor in price

Prices vary, but high profit potential; location/ac-tivities offered are a big factor in price

Prices vary; usually higher than other wholesale prices; depend on quality of product

Price is low: producer is a “price taker”; wholesale prices are typically low; know wholesale price before approaching outlet

Price is low to medium; many institutions prefer to order through a distributor

Prices are competitive, but gener-ally low: producer is a “price taker”

Volume/Crop Diversity

Varies with market; Low to medium for both volume and crop diversity

High: wide variety of crops needed; general rule is to serve 20-30 members per acre of production

Medium to low: location and competition dependent; good place to sell extra volume or seconds

Medium to low: location and competition dependent; can market a single seasonal crop

Medium to high: opportunity to sell farm products when visitors are on the farm; depends on season

Variable, usually small volume of fewer specialty items; accept non-standard sizes

High to variable; can be a strong channel when harvest is abundant; low to medium crop diversity

Medium to high

High

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Farmers Market

CSA Farm Stand

U-Pick Agri-tourism

Restaurant Grocery Store

Institution Distributor

Level of Manage-ment Required

High: long distances may need to be travelled; hours dedicated to selling; most markets run 3-5 hours

High: must sell mem-berships, utilize word of mouth networks & facilitate weekly pick-ups. Less post-harvest labor

Variable: ranges from unstaffed honor system to staffed stores; can advertise

Variable: ranges from unstaffed honor system to staff supervision. Must advertise

Medium to high: need to utilize multiple marketing channels; manage farm activity & programs; manage staff; extra time to make farm attractive/accessible to the public

Variable: constant communi-cation typical; requires a high level of service for the volume sold; multiple deliveries

Low: Relatively quick and easy for volume sold; must meet packing standards

Low: Relatively quick and easy for volume sold; can use schools for CSA & farm education programs marketing

Low: Relatively quick and easy for volume sold; must meet packing standards; very little marketing

Asso-ciated Costs

Market fees, equipment, travel, hired labor

Packaging materials, advertising, brochures, recruiting new members, labor

Road side signs and other advertising; sales staff optional; building, coolers, shelving

Road side signs and other advertising; sales staff optional

Advertising; infrastruc-ture; edu-cational staff; hired labor; insurance & permits

Washing, cooling & packing equipment for high volumes. Delivery costs

Washing, cooling & packing equipment for high volume. Delivery costs

Washing, cooling, packing & processing foods for high volume. Delivery costs

Washing, cooling & packing equipment for high volume. Delivery costs

Farmer Stress

Relatively low: Go or don’t go

Low to medium: must meet customer expectations weekly

Variable: depending on overhead & scale

Low to medium: have to deal with public on the farm

High: have to deal with public on the farm; logistical juggling

Medium to high

Medium to high

Medium to high

High: distributors cited as highest stress consumers

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Farmers Market

CSA Farm Stand

U-Pick Agri-tourism

Restaurant Grocery Store

Institution Distributor

Regula-tions

Need certified product sign at POS; any processed food requires additional licensing & labeling per state laws

Membership agreement

Food retail license; for any processed foods: commercial kitchen; Food safety plan (HACCP); other local ordinances may apply

Extra product liability insurance

Multiple forms of farm liability insurance needed; for any processed foods: commercial kitchen; Food safety plan (HACCP); other local ordinances may apple

Some packing standards if enforced by restaurant; any processed food requires additional licensing and labeling

GAP certification; Food safety plan (HACCP); product liability insurance; packing standards if enforced by store; any processed food requires additional licensing and labeling

GAP certification; Food safety plan (HACCP); product liability insurance; packing standards if enforced by institution; any processed food requires additional licensing and labeling

GAP certification; Food safety plan (HACCP); product liability insurance; packing standards; any processed food requires additional licensing and labeling

Face Time w/ Customer

High: Connect with customers, gauge product preference and feedback; build reputation

Low: Depends on pick-up location of share

Low to Medium: depends on staffing arrange-ment

Low to Medium

Medium to High: depends on staffing arrangement

Low to Medium: depends on relationship

Low Low Low

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Price CompetitivelyOne of the more difficult things about farming is tracking the volatile market. When you’re operating outside of commodities, it’s very difficult to stay abreast of what is a high or low price. It can change based on weather, (perceived) scarcity of items, distributor influence, and whole host of reasons.

Below are some tips shared by both farmers and buyers:

No matter what: Charge enough to pay yourself fairly. Don’t undersell yourself. Customers will always complain about your prices; don’t immediately lower

them. Recognize (and calculate!) the value of your product and the cost it took to produce. (Refer to the FarmsReach Business & Financial Planning Toolkit.)

Keep up-to-date of open-market prices: contact your local distributors and grocery store buyers to check on weekly prices, or – better yet – get on their email list of their weekly price sheets.

Develop strong relationships with your buyers; they can give suggestions on how best to price your product.

Refer to the Organic Price Report. Compare organic and conventional prices in markets across the country.

Create Your Brand

Develop an identity so buyers seek you out; create relationships with your customers.

In direct marketing, your face and name are your brand and recognition. Create a quality product and your brand will grow quickly!

Use your label to tell the story of your farm, farming practices, and values. Broaden markets (and increase your profit margin) with value-added products. Take part in state-wide Buy Fresh Buy Local programs; gain access to

membership benefits and listings in local directories. Put your logo, tagline, and image on everything: invoices, checks, business

cards, market signage, trucks, and merchandise.

Be A Sales Person!

Profit is the goal. It’s okay to make it your #1 priority. Overcome your fear; don’t limit your sales (and farm success) because you’re

scared of rejection. Don’t take rejection personally. Take comfort in statistics. For every Yes, you

may need to go through 9 No’s. Think of each No as one step closer to a Yes. No matter what – don’t sell your product for less that what it cost to produce! Be a Professional

o Deliver in full and on time.o Maintain open communication.o Respond quickly to customer questions and requests.o Ask for feedback. Please your customers.

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Track Your SalesMany farms sell the same crops to the same channels year after year without doing the analysis to see if it even makes sense. A little bit of business planning can go a long way to your short-term and long-term financial health!

Just like investment advisors tell people to evaluate their portfolio each year and move things around to maximize their return, you too should evaluate your net revenue from each channel and determine if you’re selling the best crops to the best customers for your highest profit.

Below are some easy ways to track your sales.

Wholesale:o Use duplicate invoices to create an easy-to-follow paper trail

Farmers Market & Farm Stands:o Get in the habit of tracking individual crop sales. Take an inventory of

crops and quantities before and after market; you can reconcile difference at a later date.

CSA:o Do a little each day instead of letting it build up.o Record weekly share crops and quantities – keep records!o Periodically put all sales numbers into your sales spreadsheet. breakdown

of sales overtime is highly valuable for financial planning.

At least once a year, look at the numbers, evaluate your progress, and make changes when needed. For more information on financial planning, refer to the FarmsReach Business & Financial Planning Toolkit.

This Info Sheet was based on our own research and resources recommended by our member farmers:

Cultivating Direct and Wholesale Market Outlets, Miranda Duschack and Katie Nixon, 2011

Guide to Marketing Channel Selection: How to Sell Through Wholesale & Direct Marketing Channels, Thompkins County Cooperative Extension, 2010

SACOG Rural-Urban Connections Strategy, 2012

Small Farm & Direct Marketing Handbook, Washington State Dept. of Agriculture, 2010

The ABCs of Marketing to Restaurants, Michelle Frain, 2002

The Organic Farmer’s Business Handbook, Richard Wiswall, 2009; Available on Amazon.com

Wisconsin Local Food Marketing Guide, Wisconsin Dept. of Agriculture, 2008

Was this Info Sheet helpful to you? Do you have suggestions for how we could improve it? We want to hear from you! Contact Eva Antczak at evaa@farmsreach.com.

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