ATTENTION: This presentation is meant to be used as a training tool for food producers, food marketers and food buyers.

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1 ATTENTION: This presentation is meant to be used as a training tool for food producers, food marketers and food buyers. Please contact: Francisco Abelló Extension Associate Texas A&M AgriLife Extension Service, Agricultural Economics fabello@agecon.tamu.edu Copyright 2010 by Timothy A. Woods. All rights reserved. The MarketReady Program was researched and developed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this program may be duplicated or reprinted for distribution in any form or by any means stored or copied without prior written permission of the author.

2 MarketReady Strengthening Local Food Supplier Capacity, Dr. Tim Woods The MarketReady Training program addresses the market development risks and relationships small farmers and ranchers must manage as they seek to develop supplier relationships with restaurants, grocery, wholesale and foodservice buyers. MarketReady seeks to educate and help food suppliers to design a better business strategy to succeed in today s markets and continue to be profitable, in order to keep farming. The training is based around best business practices identified by buyers in these markets that are actively seeking to engage local suppliers. This set of slides were developed based on the MaketReady s reports and slides built by: Dr. Timothy A. Woods, Extension Professor University of Kentucky Department of Agricultural Economics 402 Charles E. Barnhart Bldg. Lexington, KY Phone: , Fax: tim.woods@uky.edu Copyright 2010 by Timothy A. Woods. All rights reserved. The MarketReady Program was researched and developed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this program may be duplicated or reprinted for distribution in any form or by any means stored or copied without prior written permission of the author.

3 Identifying supplier best practices Interviews with over 150 buyers

4 Grocery, Wholesale & Foodservice Sales Dr. Tim A. Woods University of Kentucky

Insurance Quality Assurance, Audits & Certifications

5 MarketReady Modules Communication & Relationship Building Packaging Labeling Pricing Supply Delivery Invoicing Insurance Quality Assurance, Audits & Certifications Satisfaction Guarantee Marketing An ongoing process Local Products for Local Markets

6 Communication & Relationship Building Interview quotations about communication: Call me,! Keep me posted as to what s happening. I need two weeks notice of any changes. Communicate 2-3 times per week during produce season. I need four days notice to re-supply elsewhere if farmers won t have the product.

7 Best Marketing Practices: Communication & Relationship Building I understand the importance of advanced notice to the buyer about my products availability and changes in quantity or quality I have the buyers contact information such as their direct phone numbers, and ; I understand the best way to reach them I understand wholesale food buyers have many demands on their time, therefore I make appointments in advance in order to meet with the buyer about my products

8 Best Marketing Practices: Communication & Relationship Building I am building good relationships with my customers so that, if deliveries are delayed or mixed up, we can have an honest conversation about their concerns I present a professional and clean personal appearance when making business calls to potential customers

9 MarketReady Modules Communication & Relationship Building Packaging Labeling Pricing Supply Delivery Invoicing Insurance Quality Assurance, Audits & Certifications Satisfaction Guarantee Marketing An ongoing process Local Products for Local Markets

10 Packaging Wholesalers and grocers look for conventional boxes Sanitation and durability Looking for traceability and function for packages down the road Prefer farm identification labels and packaging

11 Package Function

12 Stores with Local Grower s Produce

13 Packaging and Image

14 How Local is Local? Farmer only farm markets Production within miles Regional Appalachians State boundaries Made in the USA? Consumers increasingly care about food origin. Truth in advertising? Credibility for the local brand

15 Need to learn more about local definitions and bounds Defining and Marketing Local Foods: Ohio Figure 2: Maximum Distance Consumers Considered as "Local" Percentage miles 50 miles 75 miles 100 miles 200 miles 300 miles 500 miles within OH within the U.S. Categories Source: Batte et al., 2008.

16 Grocery retailers doing their best to source as locally as possible State-level promotions growing in popularity Rarely able to promote at farm-supplier level

17 Best Marketing Practices: Packaging I understand industry standard packaging and am prepared to deliver that kind of package I asked the buyer how they want products packaged I will package appropriately to protect integrity, temperature and contamination I will package to allow storage on pallets, in racks

18 Best Marketing Practices: Packaging I have access to industry standard materials I have processors to produce desired cuts or products from meat or dairy production I produce and provide products that consistently meet USDA or industry grading, sizing and quality standards

19 MarketReady Modules Communication & Relationship Building Packaging Labeling Pricing Supply Delivery Invoicing Insurance Quality Assurance, Audits & Certifications Satisfaction Guarantee Marketing An ongoing process Local Products for Local Markets

20 Labeling Be COOL Country of Origin Labeling is required Do not over-label PLU or UPC codes The Packer Merchandising Guide Statement of product identity Indicate appropriate certifications Get Go Texan labels!

21 Picking your product out of a crowd

22 Labeling Labels for meat products have to have up to eight features with specific information including: Product Name USDA Inspection Legend Net Weight Handling Statement Address (Signature) Line Ingredients Statement Nutrition Facts Safe Handling Instructions

23 Labeling Sample Label for Lamb

25 U.S. Food Labeling Guide The Food Institute Labeling Requirements Nutrition Identity Ingredients Content Claims

26 Best Marketing Practices: Labeling I understand labeling will build my farm s identity and improve product presentation I understand legal regulations for labeling my products I can PLU sticker or UPC label my products as required by the customer I package and label for product traceability or will work with the buyer on product traceability procedures if required I can verify all label claims on my product labels I explain to buyers what terms like grass-fed, pasture raised, natural, anti-biotic free, and other phrases mean when used on product labels, literature or packaging

27 Market Ready Modules Communication & Relationship Building Packaging Labeling Pricing Supply Delivery Invoicing Insurance Quality Assurance, Audits & Certifications Satisfaction Guarantee Marketing An ongoing process Local Products for Local Markets

28 Comparative Wholesale Pricing Processing costs for local meats are too high to be competitive on a commodity basis. Local meat has to sell for more. Mark Critchfield - Critchfield Meats Lexington, KY Wholesale meats prices Produce auction and wholesale prices Auction and farm market prices Wholesale terminal prices for produce

29 Pricing Standard Retail Pricing Margin-based retail pricing (used by almost all food retailers standard retail price) Food cost % = 1 - % margin Target retail price = wholesale unit cost/food cost % Example: A retailer wants to get a 40% margin on asparagus. A case standard is 28 pounds and costs $48.50 from the supplier. This comes to $1.73/pound cost to the retailer. The food cost % in this case is =.60 The target retail price to reach the margin with this method is $1.73/.60 = $2.89/lb.

30 Standard Retail Pricing How is the target margin determined by the retailer? Spoilage higher likelihood of loss means higher margin required to cover losses Theft or unaccounted loss of inventory Unsold inventory Seasonality, demand, availability in other stores Special promotions Typical grocery produce margins run 33-50% and are variable across items

31 Best Marketing Practices: Pricing I research current market prices and am aware of the transportation costs I incur in delivery I understand processing, packaging costs and any other post-harvest costs I will discuss and provide a written description of my products attributes, benefits and label claims I will give an estimate of how much product volume I can provide and for how long I will quote the buyer a delivered price for the product I am prepared to discuss each size, grade or cut of product with the buyer I priced the product at a level where I can make a profit and be a stable supplier

32 MarketReady Module Communication & Relationship Building Packaging Labeling Pricing Supply Delivery Invoicing Insurance Quality Assurance, Audits & Certifications Satisfaction Guarantee Marketing An ongoing process Local Products for Local Markets

33 Supply You can t get away with telling the customer, we don t have it, not in wholesale food sales. There is no, no in my business. -Bert Robinson, owner Superior Meats, Louisville, Kentucky

34 Supply Are there minimum volumes needed to do business? There are small, medium, and large wholesalers and grocers dealing with a wide range of minimum volumes Pre-planning on volume and market season is highly desired Discuss target volumes for specific merchandising events

35 Supply Take responsibility for the volume committed to supply Providing exceptional service in the case of crop failures or other challenges helps strengthen the farmer-wholesale buyer relationship Regular updates about availability, quality and expected volumes is often the preferred method to reach out to busy wholesale buyers

36 Best Marketing Practices: Supply I will discuss the potential products and forms of products that the buyer may be interested in purchasing I will supply a consistent volume of product to the buyer for a specified period of time I understand the importance of advanced notice to the buyer about product availability and changes in quantity or quality I have a plan to accomplish steady production of my product I have the buyers contact information I am aware that some buyers may want to purchase products from an independent wholesaler in order to improve their logistics and quality assurance procedures

37 MarketReady Module Communication & Relationship Building Packaging Labeling Pricing Supply Delivery Invoicing Insurance Quality Assurance, Audits & Certifications Satisfaction Guarantee Marketing An ongoing process Local Products for Local Markets

38 Delivery Direct store delivery an option for smaller independents, some larger retailers Wholesaler/aggregators to provide a valuable service to smaller producers Perishable Ag Commodities Act (PACA) Governs inter-state trade Red Book and Blue Book Sysco, Inc., Louisville, KY

39 Bread and Cheese Direct Suppliers

40 Delivery Grow Farms, Louisville Grasshoppers Distribution, Louisville Regional distributors and wholesalers KCARD/KDA Rich Laing Many products require maintaining the cold chain

41 Best Marketing Practices: Delivery I understand the cost in time and fuel, etc. associated with product delivery I will arrange affordable transportation to the buyers requested delivery location(s) at an acceptable frequency I will ask the buyer about delivery procedures and accommodate if able I have an invoicing system that allows me to leave an invoice with each delivery or provide a bill of lading and send an invoice via mail or I will investigate delivery services in new areas to gain new clients I will build good relationships so that, if deliveries are delayed or mixed up, we can have an honest conversation about their concerns

42 MarketReady Module Communication & Relationship Building Packaging Labeling Pricing Supply Delivery Invoicing Insurance Quality Assurance, Audits & Certifications Satisfaction Guarantee Marketing An ongoing process Local Products for Local Markets

43 Invoicing and Records Document all transactions Grocery, Wholesale and Foodservice buyers more demanding, need regular communication of basic information Name, address, phone number, product, how much it weighed and how much it cost. (date, transaction# are a good idea, too) Invoice Bill of lading deals with transportation records Cash/payment receipt Occasional seasonal transactions with smaller independents may be more flexible Larger sales volume needs system of financial controls Consider QuickBooks

44 Invoice Example Farm Logo displayed prominently Space for customer contact information Invoice DIRECT TO YOU FARM Date: 10/30/2009 INVOICE # [100] TO [Name] [Company Name] [Street Address] [City, ST ZIP Code] [Phone] Customer ID [ABC12345] Salesperson Job Shipping Method Shipping Terms Delivery Date Payment Terms Due Date Net 15 Days 11/15/2009 Qty Item # Description Unit Price Discount Line Total 2 Cases HEIRLOOM TOMATOES Invoice date and number Payment terms and due date specified Your Farm s complete contact information Total Discount Subtotal Sales Tax Make all checks payable to DIRECT TO YOU FARM Thank you for your business! Total DIRECT TO YOU FARM [Street Address], [City, ST ZIP Code] Phone [ ] Fax [ ] [ ] Quantity, Product, Cost and Total

45 Bill of Lading

46 Basic Marketing Practices: Invoicing and Records I will provide a numbered invoice form with farm name, address, phone number, and other contact information printed on it The invoice form will have the date, P.O. number, product description, weight or quantity, price per unit and total price I understand the invoicing procedures and have discussed them with the buyer. I have made sure that my invoice statement or system meets their requirements, including electronic delivery if required

47 Basic Marketing Practices: Invoicing and Records I am prepared to accept payment as agreed upon with the buyer (14 days/a month) For produce sales, I understand the applicable PACA rules I understand and can supply a Bill of Lading if using a third party to deliver the product to the retailer

48 MarketReady Modules Communication & Relationship Building Packaging Labeling Pricing Supply Delivery Invoicing Insurance Quality Assurance, Audits & Certifications Satisfaction Guarantee Marketing An ongoing process Local Products for Local Markets

49 Insurance Smaller grocers and wholesalers tend to have minimal coverage requirements: mostly $1 million umbrella, some $2 million Larger retailers can require as much as $5 million in coverage Ask your insurance provider communicate your business activities

50 Best Marketing Practices: Insurance I will verify with the buyer their company s vendor requirements for product liability, worker s compensation and other insurance policies I will show proof of proper coverage I will have liability insurance coverage for my farm business activities

51 MarketReady Modules Communication & Relationship Building Packaging Labeling Pricing Supply Delivery Invoicing Insurance Quality Assurance, Audits & Certifications Satisfaction Guarantee Marketing An ongoing process Local Products for Local Markets

52 Quality Assurance, Audits & Certifications Food safety is the biggest issue on the horizon for local products. Rob Turnier, President Creation Gardens, Louisville, KY Good Agricultural Practice (GAP) program Voluntary (smaller retailers) 3 rd party audit (largest buyers and Federal purchases) Kentucky program

53 Quality Assurance, Audits & Certification Few restaurants buying direct from growers identified these as major requirements Meats/dairy lean on USDA inspection; processors must be USDA inspected Grocers/wholesalers differ widely Large entities see mandatory USDA GAP with 3 rd party certification as imminent Small entities seem satisfied with certification of GAP training

54 Quality Assurance, Audits & Certification Credits Product guarantees Bill of Lading role Long term relationship building on quality

55 Best Marketing Practices: QA, Audits & Certifications I understand that quality assurance from a wholesale buyer s perspective means the vendor guarantees 100% of the product meets their specifications I understand temperature requirements and safe handling practices for the products I deliver I understand and will agree to buyer temperature protocols, and will meet those guidelines I am willing to receive GAP training and certification if necessary I am willing to have a farm inspection by the buying organization or a specified third party

Quality Assurance, Audits & Certifications Satisfaction

56 Satisfaction Guarantee Communication & Relationship Building Packaging Labeling Pricing Supply Delivery Invoicing Insurance Quality Assurance, Audits & Certifications Satisfaction Guarantee Marketing An ongoing process Local Products for Local Markets

57 Satisfaction Guarantee 100% Satisfaction Guarantee To ensure satisfaction, regular communication is essential Build trust Credit is typically given for off-grade or spoiled produce Many firms reserve right to refuse produce if it does not meet their quality standards

58 Satisfaction Guarantee Business is all about partnership and trust. Tell me upfront if there is a problem. Don t send something off quality to fill an order. You can tell who is out strictly for the dollar versus those that care about your business. Marvin Lyons, Produce Buyer Biggs Supermarkets (now Remke Markets), Milford, Ohio

59 Satisfaction Guarantee I am prepared to stand by my products 100% I have explained how my product will be delivered and packaged, and have heard any concerns they have with my product I am willing to consider production adjustments to improve the final product quality if necessary

60 MarketReady Modules Communication & Relationship Building Packaging Labeling Pricing Supply Delivery Invoicing Insurance Quality Assurance, Audits & Certifications Satisfaction Guarantee Marketing An ongoing process Local Products for Local Markets

61 Marketing Neither chefs or grocers were looking for substantial marketing support, although Nice opportunity to tell farmer stories Local labels much more critical in product buying environments (retail) Marketing support varies depending on the volume. With more volume we expect more support from the vendor. Jamie Postel, Produce Buyer Meijers Grocery Stores, Union City,Ohio

62 Source: Kentucky Department of Agriculture

63 Marketing In-store displays Farm brochures Websites

64 In-Store Producer Promotion

67 Marketing Who are we selling to? Understand the grocer or wholesaler s customers to create proper marketing materials What s our message? Point of purchase promotional literature, websites and newsletters are a direct way your farm s products will be promoted Simple marketing materials that tell a farm s story may be needed to promote your products Host the buyer and staff on a farm visit create a connection for staff to enthusiastically pitch locally grown products!

68 Best Marketing Practices: Marketing I will provide a brief farm history, production description and photos if requested I will host on-farm visits to show my farming practices to customers and their agents as requested for promotional and quality assurances purposes I am available to promote my products at food tradeshows and in-store product demonstrations I will help with or provide literature that accurately describes farm production practices, product attributes and potential consumer benefits

69 MarketReady Modules Communication & Relationship Building Packaging Labeling Pricing Supply Delivery Invoicing Insurance Quality Assurance, Audits & Certifications Satisfaction Guarantee Marketing An ongoing process Local Products for Local Markets

70 Local Products for Local Markets: Barriers to Development Grocery/Wholesale/Foodservice Aggregation and quality assurance Cooperation among local growers to supply local market Communication with buyer

71 Local Products for Local Markets: Barriers to Development Local Meat Marketing Growers undercutting their own distributor Volume of local product Pricing structure to make meat (beef) profitable for grower, processor, distributor, and grocer/chef

Best Marketing Practices: Local Products for Local Markets Emergence of specialized local wholesalers (Grow Farms, Grasshoppers) Coordination of

72 Best Marketing Practices: Local Products for Local Markets Emergence of specialized local wholesalers (Grow Farms, Grasshoppers) Coordination of insurance, Quality Assurance, merchandising volume Different opportunities for smaller firms serving very local markets ValuMarket, international community

73 Best Marketing Practices: Local Products for Local Markets I am prepared to communicate with my buyer on a regular basis and know the best way to contact them I have contacted the Kentucky Department of Agriculture regarding Kentucky Proud merchandising opportunities and materials I am prepared to cooperate with other local growers in order to aggregate inventory, and to coordinate storage or delivery I will take 100% responsibility for the integrity, quality and safety of my products

74 Self-check to see if you are MarketReady! Thank you!

Shaw's Supermarkets, Inc. Vendor Supply Chain Guide: Original Date: Effective February 19, rd Update : Effective March 6, 2011

Shaw's Supermarkets, Inc. Vendor Supply Chain Guide: Original Date: Effective February 19, 2006 3 rd Update : Effective March 6, 2011 These instructions provide key information on our requirements for