Posted September 7, 2017
In early 2016, FINE conducted a survey of over 220 New England producers from a wide range of farm sizes and experiences to gain a better understanding of the opportunities and challenges farmers face in institutional markets. Our survey covered all six New England states. Twenty-six percent of producers responding reported that they sold products directly to institutions, while another 45% reported that they were at least somewhat interested in direct-to-institution sales. We wanted to examine the differences between those producers who sell to institutions and those who do not; to identify perceived benefits and challenges of working within institutional markets; and to explore the opportunities and challenges of making sales through intermediaries like food distributors, food hubs, and foodservice management companies.
Given that the core of FINE’s mission is built around sustainable land and ocean ecosystems, we feel it is important to give farmers and fishermen a forum to respond to our work. In this piece, we do that by talking with one producer to see where their farm experience supports our findings and where it differs.
About Lakeside Family Farm
Lakeside Family Farm, LLC is a fourth-generation farm located in Newport, Maine. They grow over 30 types of vegetables and are committed to providing fresh, local produce that is safe, high-quality, sustainably grown, and available at reasonable prices. Lakeside Family Farm’s business model is built primarily on direct-delivery sales through diverse channels, including Hannaford supermarket chains, Maine Farmers Food Hub, Maine Workplace FarmShare CSA, and some institutions. Lakeside also works with a few Maine distributors.
On July 25th, we invited Lakeside’s Sarah Redfield to take part in our Producer Perspectives webinar to share her experience as a midsize producer and aggregator of other farmers’ products. Any one individual farmer’s experience with selling to institutions will almost certainly vary from the aggregate findings from our survey research report, so it’s important to recognize that these experiences provide unique, honest perspectives on the part of individual farmers that help us round out the story and enrich our understanding of their perspectives. After the webinar, Sarah took time to talk with us further about Lakeside Family Farm’s work marketing to Maine institutions and working with intermediary buyers, and she provided some reflections on our findings.
FINE's Producer Report found that, on average, farms that sold directly to institutions had both higher gross sales and grew by three acres between 2012 and 2015, while those that didn’t sell directly to institutions stayed the same size on average. This is consistent with the growth at Lakeside, a mid-size farm, which has grown over the years and has enjoyed institutional sales, though Sarah does not attribute that growth to such sales. Rather, the growth has followed their own 10-year plan for all of their market expansion, which includes – but is not limited to – institutional sales. She noted that reliable institutional buyers can be an especially important market during the winter; when summer sales drop off, they can move the heartier inventory they’ve been able to stock up in the fall by partnering with buyers at colleges and universities to extend the season.
Marketing to Schools, Colleges & Hospitals
One difference between FINE’s findings and Lakeside Family Farm’s experience was in the type of institutional buyers that are easiest to work with. On the whole, FINE’s sample of producers reported that, on average, 49% of institutional sales are made directly to K-12 schools. Sarah’s experience stands out in that colleges and universities make up the bulk of Lakeside’s institutional sales. Sarah believes there are a few reasons for this. Many K-12 schools, they’ve found, operate on lean budgets and do not have the facilities or equipment necessary for processing whole fruits and vegetables, preferring pre-sliced, peeled, or processed produce instead. But many farms – including Lakeside – don’t have the time, labor, or equipment necessary to process veggies beyond washing and bulk packing, resulting in a gap between what the farm is able to offer and what the K-12 buyer needs. By contrast, colleges and universities have been easier for Lakeside to work with.
Sarah has found that K-12 schools near her also tend to prefer making purchases through distributors with whom they already have relationships, rather than placing piecemeal orders through individual farms. (Although this is not so different from the colleges and universities Lakeside supplies, larger institutions tend to have more resources to work with in terms of dining services, ordering processes, and staff, meaning they can exercise greater flexibility in their purchasing choices.) While this increases the ease of doing business for schools, depending on the distributor it may also limit the selection of locally-grown produce available to them. As such, Lakeside no longer sells produce to K-12 schools, although Sarah is quick to share that they enjoyed their K-12 customers while they had them, recounting the charming thank-you cards Lakeside received, and the photographs of students with pumpkins Lakeside gave to a local elementary school one year.
Opportunities & Barriers
Lakeside Family Farm’s experience is consistent with responding producers engaged in direct-to-institution in that these sales (specifically to colleges and universities, in Lakeside’s case) provide an additional or extended market for products, help foster community relationships, and provide fair and stable prices. However, in contrast with what surveyed producers reported, Sarah has not found that institutions reliably place large-volume orders or provide reliable advance contracts with her farm, reduce the need and costs for marketing or distribution for her farm, or are a good market for her farm’s surplus produce.
Regarding order volumes and contracts, Lakeside’s experience with some institutions has been difficult. It is often not cost effective for her farm to make deliveries for small institutional orders – say, a single order of ten pounds of radishes, for example. She believes completely that these institutions want to support their area farmers and want to order what they can. At the same time, she is not sure they understand the constraints related to this kind of order. She feels that failure to establish firm buying commitments also means that farmers have less confidence and thus may not be willing or able to make investments in equipment and the like that might bring costs and prices down.
Sarah generally agreed with FINE’s findings that inexperienced producers’ perceived barriers to selling to institutions are just that: perceived barriers. With the exception of the institutions that have volume needs too small for production and delivery to be cost effective, all other barriers outlined in the report have proven not to be barriers for Lakeside at all, suggesting agreement with FINE’s conclusions that the perceived barriers to direct-to-institution sales seem more problematic than they are in practice.
Working with Intermediaries
Sarah indicates that the problem of institutions with too-small volume requirements can be solved when intermediaries – distributors, and food service management companies – that are committed to buying and providing local produce are willing to serve as a go-between for farmers and institutions. While Sarah says that Lakeside is unable to deliver “twelve pounds of whatever to hospital X or restaurant Y,” some distributors will cater to their institutional buyers’ smaller orders. Sarah says that Lakeside’s sales through intermediaries are growing thanks to intermediaries’ willingness to aggregate orders and make those customized deliveries.
But Sarah is well aware that working with intermediaries is not without its own challenges. Distributors often impose markups that make products more expensive, a potential deterrent to institutional buyers. If an institution asks (legitimately) for a lower price in order to meet their own bottom lines, she says, the intermediary is not likely to be flexible, meaning any needed discount is most likely to be absorbed by the first link in the supply chain – the farm. Unfortunately for Lakeside, this means they simply cannot rely on intermediary sales alone. Although intermediaries can offer some conveniences, Sarah says they prefer to skip the middle-man where possible and market directly to institutions.
The concluding chapter of FINE’s Producer Report offered several data-driven recommendations for key audiences, including farmers, producer service providers, government officials, funders and nonprofits, and institutions.
One recommendation is for funders, nonprofits, and government officials to support and/or host meet-the-buyer events wherein producers and institutional buyers come together to better understand each others’ needs and develop new business relationships. Sarah agrees with this advice and adds some details meant to make these events more successful. First, facilitators and institutions should bear in mind that farmers are incredibly busy, especially in spring, summer and fall, when planting, farm maintenance, and harvest are in full swing. Their time and resources during these months are usually limited, making it difficult to justify leaving the farm where they earn their living. Also, to encourage greater producer participation at meet-the-buyer events, Sarah suggests that facilitators offer travel stipends to cover producers’ expenses and make up for some of the time lost on the farm.
Strong, Sustained Relationships
Sarah’s experiences lead her to suggest wariness about working with potential buyers who are enthusiastic about their local spend at the start of the growing season, but fail to offer a binding contract or to follow through in a serious way. This misleads producers (especially young farmers) into planning their season around institutions’ expected needs, only to have buyers pull out of informal agreements later on and leave producers with market uncertainties. Sarah cautions institutions not to exaggerate their local spend or to entice farmers to gear up to serve them, but instead to ask lots of questions and be forthright about one another’s needs. With or without binding contracts, strong relationships are vital to doing business with institutions; reliable increased sales, she says, help producers become more efficient and build equity and trust in the business relationship.
Finally, Sarah asks that institutions, governments, nonprofits, and funders partner with producers to think about how to better engage with institutions in a sustained, mutually beneficial way. This could mean a creative brainstorming session or sustained farmer advisory group meant to inform institutional buyers about how to create value-added products that are ready-to-use by institutions; for example, providing resources or facilities that enable producers to peel squash or slice carrots prior to delivery. It could also mean finding ways to work together to aggregate and deliver product from farms in a way that does not add costly infrastructure or markups, keeping local produce affordable. (This last is a model that Lakeside is already using through an informal network of colleague farmers operating as the Maine Farmers Food Hub.)
Demand for Local Food
At FINE, we already know why we love local food: we like the idea of supporting our neighbors’ livelihoods by spending our hard-earned dollars within our communities, and we appreciate the difference that local offers in taste and freshness. What’s harder is conveying those values to institutional buyers, who are justifiably concerned with their bottom lines. Producers can’t create demand on their own, nor should they, which means that those who are working to improve New England’s food system need to be on the ground harnessing interest in local food among students, faculty, food service directors, institutional administrators, and alumni. Producers, in the meantime, are doing the hard work of growing and making good food that can meet local demand. If we focus our efforts around driving up demand, producers will meet our needs; reliable demand means they will have the resources to supply us with a higher volume of local food.
Want to help? Work to boost the demand for local food at institutions in your community!