by Sarah Bostick, CFSA Farm Services Coordinator

Small-scale farming in America has long been synonymous with farmers markets, CSAs, and roadside stands. That is changing as the demand for local and organic foods are becoming increasingly mainstream. Grocery stores, public school systems, distributors, and even hospitals are responding to public interest and willingness to pay more for locally sourced food by developing local buying programs.

Small and medium-scale farmers in the Carolinas are perfectly positioned to fill this expanding demand for locally produced food. There is one significant roadblock to entering the wholesale market for many farmers: a big learning curve.

If you have never sold to wholesale buyers that follow stringent packing, transport, and labeling protocols, you have a lot to learn. If you don’t know what a 22.3 gallon vented, gusseted, 3 mil poly bag secured with a metal tie is, join the crowd. If you don’t know where to start with designing traceability labels and processes on your farm, you aren’t alone. If it comes as a surprise that a case of beautiful, perfectly ripe tomatoes will most likely be rejected by a grocery store because they are perfectly ripe, you have plenty of company. In fact, in formal and informal polls and studies across the nation, wholesale buyers cite lack of wholesale readiness on the part of farms to be their biggest barrier to purchasing more local food.

This month’s Expert Tip is about perception and assumptions.

Formal and informal polls across the nation show that farmers who are not currently selling to wholesale buyers assume that their biggest barrier to wholesale is the price. How many farmers do you know who say “I’d love to be selling to the grocery store in town, but I think the prices I’d be getting are so much lower than what I can charge at the farmers market, so it would never work.” There’s a heck of a lot of assumption packed into that statement and depending on many, many factors, it might be entirely accurate….and it might not.

Here’s the catch: formal and informal polls across the nation of farmers who are selling to wholesale buyers place price near or at the bottom of the list of wholesale barriers.

What do wholesale-experienced farmers put at the top of the list of barriers?

  • Wholesale readiness including the ability to meet buyer specifications.
  • Ability to produce consistent volumes.
  • Having the right post-harvest handling infrastructure to meet buyer requirements.

This is a very different set of barriers than “I think the prices are too low”. Intrigued? You should be!

Steps to Evaluating if Wholesale Marketing is Worth it

Step 1

The first step forward is to assess the true costs of doing business the way you currently do it. Depending on how much information you currently track about your business, step one will fall somewhere on the spectrum between a Herculean effort and already done. If you don’t keep sufficient records to make this step in the process relatively quick, skip directly to calculating approximate marketing costs. Below is a farmer’s market example that will give you a ballpark estimate of how much profit a day at the market is bringing in:

Farmers Market Example:

Some imaginary numbers for an imaginary farmers market: One day average sales: $1500; 3 full time employees each making $10/hour; Each employee works 8 hours/day on a harvest day; market is open for 6 hours; it takes a total of 2 hours for 2 people to set up and break down your stand; your time is valued at $15/hour – and yes, you do have to value your time!

Insert your own numbers to get a glimpse of the costs of selling at your farmers market.

 

COSTS SELLING AT A FARMERS MARKET EXAMPLE NUMBERS HOURLY RATE TOTAL COSTS
Cost of market booth/day $15 $15
Cost of gas for your market vehicle $30 $30
Approximate cost of market tents, tables, display containers, etc. amortized over 5 years (and divided by the number of weeks you attend market each year) $25 $25
Number of employee hours spent harvesting, washing, packing, loading truck for one market 24 $10 $240
Number of your hours spent harvesting, washing, packing, loading truck for one market 10 $15 $150
Number of employee hours spent at the market and driving to/from the market 8 $10 $80
Number of your hours spent at the market and driving to/from the market 10 $15 $150
Number of employee hours spent unloading the truck after market 3 $10 $30
Number of your hours spent unloading the truck after market 1 $15 $15
Number of hours you spend going to the bank to deposit checks and wads of cash 1 $15 $15
GRAND TOTAL COSTS FOR ONE MARKET 57 hours $750

 

Based on this very simple example, of $750 in harvesting, transportation and marketing costs and 57 hours of labor to earn $1500, it appears as though exploring the idea of wholesale might not be too crazy.

 

Step 2

If you are contemplating wholesale in general and don’t have a particular crop in mind, your next step is to calculate the approximate number of units (bunches, pounds, etc.) you sell on an average farmers’ market day.

If you have very specific, historical information about how much of each item you sell on each market day of the year and for what price – you are ahead of the game! For those of you who don’t, start recording sales information and in the meantime, guesstimate. The simplest way to guesstimate is to divide the total sales amount for one market by the average cost per unit (bunch, pound, pint, each, etc) that you charge at the market.

Example: $1500 total sales ÷ $2/unit = approximately 750 units were sold

 

Step 3

Figure out a realistic price for selling wholesale. Talk to potential buyers and talk to other farmers in your area about prices.

 

Step 4

Calculate the costs of selling wholesale. If you don’t know where to begin with this process, attend a Building Wholesale Capacity workshop or get in touch with CFSA about one-on-one wholesale consulting. We can walk you through the process of calculating approximate costs.

Here’s an example set of costs to get you started:

Some imaginary numbers for an imaginary wholesale delivery: Number of units sold per delivery is 750; buyer is paying $1.50/unit for all of your produce; all of your produce is delivered in waxed boxes that fit 24 units/box; 3 full time employees each making $10/hour; Each employee works 8 hours/day on a harvest day; delivery site is 45 minutes from your farm; your time is valued at $15/hour – and yes, you still have to value your time!

 

COSTS SELLING WHOLESALE EXAMPLE NUMBERS HOURLY RATE TOTAL COSTS
Amount of your time communicating with the buyer and keeping packaging supplies in stock 0.5 $15 $7.50
Cost of gas for your delivery vehicle $30 $30
Cost of 31 large waxed boxes, labels and one paper invoice $110 $110
Number of employee hours spent harvesting, washing, packing, loading truck for one market (fewer hours than for market because you are selling less diversity) 18 $10 $180
Number of your hours spent harvesting, washing, packing, loading truck for one market 8 $15 $120
Number of employee hours spent driving to/from the delivery 0 $10 $0
Number of your hours spent driving to/from the delivery and chatting with buyer while unloading 2 $15 $30
Number of employee hours spent unloading the truck after delivery 0 $10 $0
Number of your hours spent unloading the truck after delivery 0 $15 $0
Number of hours you spend going to the bank to deposit checks and wads of cash – buyer pays via direct deposit 0 $15 $0
GRAND TOTAL COSTS FOR ONE DELIVERY 28.5 hours $477.50

 

Step 5

Calculate your income and subtract out the costs of this delivery.

For this example, we are using $1.50/unit as the sale price.

  • Calculate income: $1.50/unit x 750 units = $1125
  • Subtract costs: $1125 – $477.50 = $647.50 profit

 

Step 6

Compare your market profit to your wholesale profit:

  • Market profit: $750  
  • Wholesale profit: $647.50

 

Step 7

See! I told you that I couldn’t make enough selling wholesale! And then compare the second set of costs: hours of labor.

  • Market labor total: 57 hours
  • Wholesale labor total: 28.5 hours

That is a big, big difference. You may come out $100 short by selling wholesale in this example, but you also just saved nearly 30 hours of labor. Ask this question to yourself: how much is 30 hours of labor worth to me? Chances are, 30 hours of labor is worth more than $100 to you. Just imagine what you could do with an extra 30 hours per week of labor on your farm.

Just like each farmers market, each wholesale buyer is unique and will come with a unique set of costs and benefits. When you are trying to decide if wholesale marketing might benefit your farm, throw assumptions out the window and run the numbers. And remember to run all the numbers – not just money. And if this feels daunting, give us a call and we can help you assess the costs and benefits of wholesale for your farm. If you decide that you are ready to make the leap into wholesale, we are ready to help you make sure that you have all the tools and knowledge in hand to get off to a successful start.

 

Want more hands-on assistance?

CFSA is ready to help! We are happy to announce our newest program to support the success and viability of small- and medium-scale farms and local food systems across the Carolinas: Building Wholesale Capacity. If you are considering entering the wholesale market for the first time or scaling up your existing wholesale marketing, our Building Wholesale Capacity Initiative can help to speed up your learning curve and assist you in making the best decisions for your farm.

Events

  • Attend one of four full-day Postharvest Handling Infrastructure workshops in North Carolina this spring. This is great for those interested in learning more about how wholesale marketing requirements might impact your infrastructure decisions.  (Please keep an eye on our Events page to locate a workshop.)
  • Attend one of four full-day Building Wholesale Capacity workshops if you are interested in learning more about packaging, labeling, traceability, billing, communications, and transportation.
  • One-on-one consulting if you’re ready to work with us to help you assess your wholesale readiness, design efficient postharvest handling systems, and create a game plan for successfully selling to wholesale buyers.

QUESTIONS?

Reach out to Sarah Bostick, Farm Services Coordinator via email or phone (919-542-2402)