Scaling Up: Wholesale opportunities provide profitable growth

The competition among farmers selling directly to consumers
is fierce and some feel that opportunity has plateaued.  Yet wholesale buyers lament the lack of reliable access to locally grown products.  Grow NYC’s FARMroots program saw this opportunity and worked with New York farmers to learn how to profitably diversify their offerings and increase their revenues.

GrowNYC, the organization that manages the city’s Greenmarkets as well as a small wholesale market, and its technical assistance program FARMroots is uniquely positioned to work with buyers and farmers to help identify key growth opportunities. In 2017 year, they received a $124,000 grant to help Greenmarket farmers diversify into profitable wholesale enterprises.

“Our experience shows us that profitable farmers utilize diversified marketing channels. A mixture of direct to consumer and wholesale channels minimizes risk, provides consistent sales, and increases brand penetration” says Christopher Wayne, FARMroots Director. 

The first step was to understand the market demand and specific needs of the buyers.  FARMroots staff interviewed 34 farmer-focused buyers. Regional distributors, fast casual restaurant chains, grocery stores and institutions with local food procurement programs, and value-added food businesses provided specific information about what they needed in a business relationship. Types of production, operational requirements, and marketing preferences were all queried.  Face-to-face interviews, often held in the buyer’s place of work, encouraged candid discussions about the opportunities and challenges of sourcing from local farmers.

Through this work they evaluated the demand for more than 50 local products. This information provided clear direction that was shared with the farmers interested in wholesaling. It also revealed an unexpected interest in fruit by the State’s craft beverage industry.

The work also clearly highlighted what was needed beyond the delicious products. Three C’s for success emerged: Capacity, Consistency and Communication were the most emphasized attributes during wholesale buyer interviews. A farmer needs to determine whether they possess the skill sets required to sell in the wholesale marketplace and if the demands are in line with their values.

In addition to alignment with buyer’s needs, the team ensured that the math worked for the growers.  Crop costing tools for pork, vegetables, cheese and high tunnels were developed. These tools allowed participating farmers to fully understand and evaluate which, if any, of the wholesale opportunities were a good financial fit for their business.

“The crop-costing tool developed Grow NYC/FARMroots has been a game changer for my business.  I use it on an ongoing basis to understand my costs.  It influences how I source my inputs and manage my labor.  It has also been incredibly useful as a business planning tool I use it to predict future costs and infrastructure needs that will be necessary for my farm’s growth.”

Lee Hennessy
Moxie Ridge Farm

17 farmers participated in an educational program that walked them through these tools and helped them conduct a feasibility analysis and assess their readiness for wholesale markets.

Once the farms that were ready for wholesale were identified, Wayne’s team introduced them to potential buyers and helped them take a look at the complicated and costly logistics of selling and delivery in New York City.  These efforts made sure that farmers were focused on creating business relationships that they could reliably service. 

Fruit Mash-Up. Driven by the interest in purchasing local fruit, a networking and Q&A session was held in NYC.  It connected value-added wholesale buyers to NY State farms. The hour-long panel discussion addressed the challenges for both growers and buyers in sourcing from small to mid-scale farms. Results captured two months after the event reported 5 farmers sold over 2700 pounds of fruit to 10 different value-added buyers. In an evaluation survey, farmers noted that they were very likely to continue to grow those wholesale relationships, and buyers stated that they were very likely to expand their sourcing to include local farm products as a result of the event.

The bottom line. Diversification can be a good business strategy in agriculture.  It can increase revenue and protect a farm from market conditions.  But if you’re a small scale farmer, identifying the right opportunity can be challenging. In just two years, this work by FARMroots increased the revenue among 12 small scale farmers by more than $100,000.  The best part? With the knowledge the farmers gained about how to profitably meet the needs of wholesale buyers, the revenue increases should be able to grow every year. 

“I don’t grow in big quantities now because I have always been worried about leaving product in the field. But with these new wholesale channels I can plant much more and not be scared of leaving it in the field. With the prices they are paying me it covers the cost of work. These prices work for me. This is an enormous difference compared to the past.”

Claudio Gonzalez, Gonzalez Farms

(Translated from Spanish).