Entering wholesale markets: strategies and resources for small & Mid-scale farm businesses A Curriculum Unit for Small Business Centers Rebecca Dunning| CEFS – NCGT | February 14, 2017 www.ncgrowingtogether.org

Components of the Local Food System Local Food Economy PRODUCTION Land use, land protections, the business of farming Suppliers’ suppliers Direct suppliers Farmers & producers STORAGE & PROCESSING Cold storage, value-added food products, food manufacturing Food hubs/aggregation Cold storage units Processing centers Commercial kitchens DISTRIBUTION & SALES Wholesale and retail supply chains, transportation channels, warehousing Trucking companies Grocery warehouses Sales teams CONSUMPTION & ACCESS Wholesale, retail, direct-to-consumer sales, food security initiatives Restaurants, specialty markets, institutions, CSAs, farmers’ markets, grocery stores, food banks/pantries Components of the Local Food System

Steps to Market (the supply chain) Consumer Retailing/Food Service Wholesaling/Distribution Processing Production Steps to Market (the supply chain) Input Supplier

Where do you think you want to be? Consumer Retailing/Food Service Wholesaling/Distribution Processing Production Ask participants where they are in this chain. If they have not yet started a business, ask them to think about where they plan to be, and encourage people to give examples of businesses at each point in the supply chain. It’s not all about just being a primary producer. Or even a producer at all, you can be a support services business. Think about all the things that go with making a product and bringing it to market, and how many of those things you want or are able to be involved in. The more steps you take ownership of, the more stretched you are. Consider collaborating with others of similar size and holding similar ideas (e.g., producing a 100% local value added product to area restaurants and retailers). Steps to Market (the supply chain) Input Supplier

Selling Wholesale and/or Being the Wholesaler Retailing/Restaurant Wholesaling/Distribution Production Let’s imagine you’re planning to be the producer and also act as the wholesaler, delivering to retail and food service customers. OR alternatively Your’e the producer but sell to a wholesaler. Selling Wholesale and/or Being the Wholesaler

Selling Wholesale – Consider: Costs of Production If you don’t know your costs of production, you can’t wisely make decisions on price and where to sell What and How Much to Produce Base it on your existing assets, your skills, and what you like to do; conduct a market assessment (estimate volume and price) If You are the Wholesaler – Food Service (restaurant) Selling/delivering direct to restaurants – timing, relationships, communication; small quantities, likely no GAP required for produce; cold chain important; labeling not required (except for meat) If You are the Wholesaler – Grocery Stores Selling/delivering direct to grocery stores - timing, relationships, communication; case and bin quantities; likely GAP required; cold chain essential; labeling essential; differentiation key. (go through each on in succeeding slides) If You Sell to a Wholesaler – Grocery or Food Service Communication, quantity, quality; GAP, cold chain, labeling essential. Pallets not cases; Bins for grocery but not food service; Risk of rejection for produce; differentiation key.

Where and How to Sell – Consider: Costs of Production If you don’t know your costs of production, you can’t wisely make decisions on price and where to sell Resources for understanding costs of production so you can estimate your breakeven price. https://ag-econ.ncsu.edu/extension/budgets/ https://ncfarmschool.ces.ncsu.edu/small-scale-budgets/

Where and How to Sell – Consider: Costs of Production If you don’t know your costs of production, you can’t wisely make decisions on price and where to sell What and How Much to Produce Base it on your existing assets, your skills, and what you like to do; conduct a market assessment (estimate volume and price) Classes at Small Business Centers like this! => A Business Plan

Where and How to Sell – Consider: Costs of Production If you don’t know your costs of production, you can’t wisely make decisions on price and where to sell What and How Much to Produce Base it on your existing assets, your skills, and what you like to do; conduct a market assessment (estimate volume and price) If You are the Wholesaler – Food Service (restaurant) Selling/delivering direct to restaurants – timing, relationships, communication; small quantities, likely no GAP required for produce; cold chain important; labeling not required (except for meat) If You are the Wholesaler – Grocery Stores Selling/delivering direct to grocery stores - timing, relationships, communication; case and bin quantities; likely GAP required; cold chain essential; labeling essential; differentiation key. Discuss differences between the highlighted items—differences are detailed in next two slides. If You Sell to a Wholesaler – Grocery or Food Service Communication, quantity, quality; GAP, cold chain, labeling essential. Pallets not cases; Bins for grocery but not food service; Risk of rejection for produce; differentiation key.

When You are the Wholesaler Who holds the liability? Liability Determine the insurance needs of the buyer Typically $1- $2 million for grocery; may be none for restaurant but that leaves you vulnerable How and over what distance? Delivery Cold chain!! How will you maintain it. Explore restaurants/grocers within a small footprint; look for restaurant groups with commissary kitchens Consider delivery windows for each; how can you make it work so you are not driving all the time; Will you have a minimum order? Products & communication Ordering Restaurants like specialty; Grocers like commodity Restaurants and grocers can be flexible if they have backup If they have backup, that makes you dispensable It is “all about relationships,” but people have to make a living Set expectations: What, when, contingencies Discuss restaurant vs grocery differences, get participants to concretely walk through how they will do this.

Resources “Selling Direct to Grocery Stores” Series from NC Growing Together

When You Sell to a Wholesaler Who holds the liability? Liability Determine the insurance needs of the buyer Typically $2 million+ Indemnity Product rejection at the warehouse How and over what distance? Delivery Cold chain!! How will you maintain it. Temps will be taken. Pick up vs delivery; don’t plan on backhaul; backhaul means you are available to meet the truck whenever it arrives Do you produce enough to justify wholesale? Products & communication Ordering They won’t “tell you what to grow” Grower contracts – you have to prove yourself first Contract or not: Establish what is being agreed to, get it in an email Wholesalers are not typically flexible – you’d better have it Be committed to lower prices on some items if you go this route Price will be 30-50% less than what you’d get selling direct to consumer

Resources Selling to a Wholesale/Distributor resources from NC Growing Together

Resources Meeting buyers

This curriculum unit was developed as part of a series of units for use by Small Business Centers and others teaching food & farm business courses across North Carolina. Additional units include Introduction to Food Safety, Direct Marketing, and Social and Online Media for Farm & Food Businesses. Please visit www.ncgrowingtogether.org to learn more, download resources for classes, or find additional units.