1. Pricing right For the marketplace Deb Foote & Gunta Vitins SunOpta Inc. February 21, 2009

2. 2 MARKET CHANNELS  Farm Gate  Farmers Market  Direct to Store  Direct to Restaurant  Direct to Processor  Through Distributors  Export

3. 3 Margins  Distributors Produce: 20 – 25% Grocery: 25 – 30%  Retailers Produce: 35 – 40% Grocery: 35 – 40% Meat: 25 – 28% Dairy: 25 – 28% Deli: 50 – 60% Bulk: 40 – 50% Frozen: 40 – 45%

4. 4 Margin does not equal Mark Up Example: 20% distributor’s margin on 1 case of apples  Farmer’s selling price = $40 per case  Distributor takes a 20% margin = $40 divided by 0.80 (note: 100% - 20% = 80% or 0.80)  Distributor’s selling price = $50 per case ****************** 20% Mark Up = $40 x 1.20 = $48 (don’t compare apples to oranges)

5. 5 Farm Gate (*Mark Ups perspective)  Selling Direct to Consumers: Farmer’s Price: 95 – 105%* of retail Consider costs: -Product & packaging -Labour -Structure & signage: road side stand or enclosed retail outlet  Selling Direct to Retailer/Restaurateur/Processor Farmer’s Price: 50 – 80%* of retail Consider costs: -Product & packaging -Labour

6. 6 Farmers Markets Farmer’s Price: 95 –100% of retail Consider costs: -Product & packaging -Labour -Market fees -Transportation -Structure: tents, tables etc -Presentation & Signage -Scales

7. 7 Direct to Store Farmer’s Price: 60 - 70% of retail price Consider costs: -Product & packaging -Labour -Transportation  Include distributor’s margin  Establish minimum order requirements  Standard packaging/caselots  Labelling – UPCs, PLUs, bilingual, organic stickers, twist-ties etc

8. 8 Direct to Restaurant Farmer’s Price: 70%+ of retail price Consider costs: -Product & packaging -Labour -Transportation  Include distributor’s margin  Split cases; non-standard quantities

9. 9 Selling to Distributors Farmer’s Price: 45 – 55% of retail price Consider costs: -Product & packaging -Labour -Transportation  Standard packaging/caselots  Labelling – UPCs, PLUs, bilingual, certification, organic stickers, twist-ties etc  Volume  Service costs per unit for farmer are lowest

10. 10 Organic Produce Pricing  Highly volatile -- changes daily  Based on market supply & demand  Standard premium for organic produce does not exist  Follow market fluctuations when determining selling price  Volume deals for promotions  Local versus Imports

11. 11 Key Purchase Factors: Produce Wholesaler – Retailer – Consumer Quality: appearance, cleanliness, ripeness, taste Price: competitive (supply & demand) Supply: consistent, timely

12. 12 Recommendations to Growers Use sales history and market trends to plan for production Discuss plans with distributors & retailers Base volumes on sound projections Set prices according to supply and demand Follow market fluctuations Communicate with your customer

13. 13 Organic Grocery Products Must have :  Appropriate & appealing Packaging, labelling (bilingual, nutritional, etc), UPCs  Marketing Funds for:  Listing Fees  Advertising: Co-ops, In Store Specials, Flyer Costs  Product Demos  Guaranteed Sales  First Case Intro Offer (free fills etc)  Store Samples (after listing)

14. 14 Questions? Contact: Deb Foote Deb Foote Organic Consulting 604-803-6476 organicdeb@shaw.ca Gunta Vitins VP Marketing, Pro Organics (604) 253-6549 1-800-461-1122 gunta.vitins@sunopta.com

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