Bridging the Gap:  What does it take to bring small and medium-sized producers together with foodservice and retail distributors?

(Sponsors: ISU Leopold Center for Sustainable Agriculture and Alces Foundation)
 
Connie Hardy, Program Specialist, Value Added Agriculture Program
 
Situation/background
 
There are two levels of marketing available to value-added producers/marketers.  The first level is direct marketing to consumers, which is often how a producer gets started in value-added marketing. The second level is to do business with food service or a retail store.  The requirements for doing business in the food service/retail areas can be very different from direct marketing.  Direct marketing to consumers makes feedback information accessible and maximizes profits at the transaction level.  The downside of a direct marketing approach is that so much time and effort are consumed when compared to volume of sales that the producer might not generate enough gross revenue or could personally burn out.
 
As producers transition from direct markets to food service/retail markets, producers must have knowledge of the demand, the channels of distribution, the characteristics of the customer and a plan for accessing and servicing that customer.  For these larger customers, distributors usually are the prime interface and are generally sophisticated in reading the demand signals.  But, to work through this channel the producer must now see this intermediary company as the customer.
 
The scope of work for this project is to help producers understand the needs of the retail/food service customer by discovering a baseline of information from food service/retail stakeholders who make decisions and who will do the actual business with the producer.  Since the customer will now be a food service or retail distributor, the sales will be made through purchasing agents of these businesses.  This leads to questions for which a producer may not have answers.  What volumes are required?  What are the packaging requirements?  What are the Quality Assurance requirements?  What is the method of payment?  How much marketing activity will I be required to do?  Will my name brand be used?  What are the delivery terms?
 
 
Response
 
To answer these questions, a series of interviews was conducted with foodservice and retail distributors to develop a baseline of information about the needs and expectations of the distributors and the distributors customers.  The distributors interviewed were those whose companies are based in Iowa and national distribution companies that maintain an Iowa division. 
 
A student intern, Nicole Bogenreif (ISU Marketing senior,) was hired for 3 months in Summer 2006 to conduct interviews with institutional foodservice customers, to prepare information packets for those producers who would like to learn about selling to distributors, and to assist producers in registering for Market Maker Iowa, a new Internet database designed to provide marketing guidance for local food producers and buyers.
 
Outputs
 
Workshops:
  The results of the distributor surveys were shared in a series of workshops called Bridging the Gap:  Selling to Food Service and Retail, held March 7-10, 2006 in four Iowa locations.  The workshops were designed to help Iowa farmers, ranchers, and processors prepare to transition from local sales to larger institutional and retail markets. 
The workshops were intended to broaden the discussion about increasing the sale of locally grown or place-based foods to new customers in educational institutions, health care facilities, restaurant and hotels, grocery and convenience stores.  The program included a presentation by Connie Hardy, program specialist with ISU Extension Value Added Agriculture, of ideas learned through interviews with representatives from 21 food distribution companies. Craig Watson, VP of Quality Assurance and Sustainable Agriculture from Sysco, a large foodservice distributor in the USA and Canada, and store managers from Hy-Vee Food Stores Inc., an Iowa-based grocery store chain, expressed interest and willingness to work with local producers to buy their products.  Common themes in these presentations were that the producer is the best spokesperson for his/her product and that food products with a story sell well.  When customers can relate the food product back to the farmer, rancher, or local processor, they are more likely to buy that product, sometimes even at a higher price.  For perishable products, customers perceive local foods as higher in value because they are fresher and unique.
 
Jeff Jobe, cooperative development specialist with USDA Rural Development program, directed the audience to resources for business planning and finance, and illustrated how companies in Iowa have used these to help them get established and grow.  Jason Ellis, ISU Extension program specialist in Hotel, Restaurant, and Institutional Management, helped participants understand the elements of food sales contracts that would be useful in their types of operations.
 
Presenters representing individual producers and product supply groups rounded out the programs by providing the Real Life Experiences perspective.  Those included in one or more workshops were:  Carolyn Adolphs, Adolphs Bakery and Produce; Kelly Biensen, Eden Natural Pork Producers; Norine Black, Blacks Heritage Farm; Kamyar Enshayan, UNI Local Foods Project; Dean Goodale, Maharishi Vedic City Organic Farms; Vivan Jennings, Asoyia; Larry Lane, Innovative Growers; and Steve Williams, Naturally Iowa.
 
Eighty participants attended the workshops, and twenty-three presenters were involved. 
 
Institutional buyer interviews
Interviews with six institutional foodservice customers were conducted by Nicole Bogenreif, and she accompanied Amit Sharma, ISU Hotel, Restaurant, and Institutional Management faculty member, to interview selected restaurant buyers and the producers who sell to restaurants.  These interviews provided a basis for characterizing the institutional foodservice market. 
 
Producer database development
A database of more than 400 Iowa farmers and ranchers was created with information about the products they sell.  This database was used to contact producers for permission to register them in the Internet database called Market Maker Iowa.  To date, over 100 producers are registered. 
 
Information packets
Packets of information about selling to foodservice and retail distributors are now available through the Extension Value-Added Agriculture office (515-294-0588).  The packets were designed in response to more than 15 inquiries for information following the March 2006 workshops.
 
Outcomes
Bridging the Gap is a two-year funded project of the Leopold Center.  In its first year, information was gathered that would help local food producers understand the expectations of foodservice and retail distributors.  At least ninety-five producers and local food proponents have shown an interest in learning how to sell through distributors to institutional customers and retail stores.  In addition, the notion of organizing into supply groups is being considered as a way to make this sales arrangement more profitable.  More than 100 producers have registered on the new database program called Market Maker Iowa.  Detailed information for the entire project will be provided in a written report to the Leopold Center and a presentation at the Leopold Center Annual Conference on November 6, 2006.
 
 
August 2006
POW# 121 Adding Value and Enhancing Agricultural Products
 

Page last updated: August 29, 2006
Page maintained by Linda Schultz, lschultz@iastate.edu