|Gordon Gerlach of Path Valley Farms delivers produce to chef Samantha Withall at Restaurant Nora in Washington, DC. Photo by Edwin Remsberg.|
Restaurants use a lot of beef. It seems, then, that they would be an excellent avenue to market your product. They must have small margins, though, because they are the most price-conscious customers that we have. They also want it in particular ways. It seems that every type of restaurant has its own particular needs.
You are probably wasting your time working with franchise restaurants. Locally owned restaurants are more likely to share your goals.
Mexican restaurants use a lot of beef, but the problem is that they use a lot of very cheap beef – the stew, rounds, brisket, skirt, plate and ground beef. We have found that even the ones who advertise healthy food with low fat still buy 60-cent-a-pound ground beef. You have to look for the kinds of restaurants that offer a healthy, ecologically sensitive and high-ticket menu.
Restaurateurs also usually want fresh, not frozen, beef. That means frequent deliveries and a convenient delivery system. They also want a uniform product. The last thing a restaurant manager wants is a customer complaining that last time he ordered this steak it was a lot bigger (or leaner, or more tender, or whatever). However, things are changing. We have found that some restaurants will accept some product variability. They are the restaurants that already buy organic vegetables and seasonal, locally produced wines and breads. The best thing is that they are usually rather expensive, too. They are used to paying extra for what they want.
Search for chefs who will work closely with you. These kinds of chefs can creatively use many different cuts and will probably teach you a lot.
Some restaurants (generally those that specialize in organic and local fare) are willing to work with a number of small producers, but they are few and far between. They generally change their menus daily or weekly. When they get a specialty item like your tenderloin, they may want to feature it that evening while it lasts. So you need to give them notice when you will have high-end cuts so they can plan with the rest of their small suppliers.
Don’t forget that high-end restaurants like lots of bones to make stock, generally more than just you can supply. It also is a nice idea to give them a few pounds of burger or roast occasionally that they can use for their staff dinners, which many host prior to serving hours. It always helps to make friends with the general staff.
You think the cattle business is tough? Spend an hour with a store buyer. They are thorough, knowledgeable, and so slick with a calculator you’ll wonder where all your math education went to. These people are like commodity brokers. They deal in tenths of percents. They are bottom line kind of people. If you are not completely buttoned up when you go to meet with these guys, they will not only chew you up, but feel angry that they wasted 15 minutes of their day on you.
Actually, they may not be that bad. However, don’t go in thinking your sweet picture of a family farm is going to win them over. That picture is very important, but so are economics, margins and markups. Know all your costs going in – transportation, storage, delivery and pallet charges.
All of this might discourage you. Don’t let it. Stores are wonderful in that, instead of having 200 customers, with 200 checks and 200 delivery times every month, you only have one. That decreases the headaches and day-to-day problems quite a bit.
Stores charge a mark up of about 30 percent – less in big supermarkets, more in small specialty stores. They will expect you to ask about their markup, and how and when they want your product delivered (and possibly by whose trucks).
Store buyers will ask you about
• Customers• Current gross sales
• When you can start delivery
• Case size
• What your product will look like (label, package, appearance)
• Promotional materials
• Liability insurance
Distributors are a lot like stores, but with even bigger volume. For you, they are one customer, requiring one bill and one delivery, that does a ton of volume. The only bad thing is that your product is more costly to the consumer. Distributors charge anywhere from 8 to 30 percent, which jacks up your price considerably when you figure the re-tail store will add another 30 to 40 percent on top of that.
It seems that every major metropolitan area has a host of distributors that could be lumped into one of two categories:
1) big volume/little service, and 2) big service/ lower volume. Big volume distributors are companies like Shamrock Foods who will want to deal with thousands of pounds of product at a time. For most family ranches (especially at start up), this is not a viable option.
The big service distributors, which are harder to find, are willing to deal with much small-er quantities (even tens of pounds). These companies are either small Mom-and-Pop operations who have somehow managed to survive from the 1950s, or gourmet-type people. The easiest way to find them is to call the purchaser (they are also sometimes called “foragers” or “buying agents”) of very exclusive restaurants and ask them who distributes their gourmet or hard-to-find items. Another nice reason for finding a gourmet distributor is that they are always looking for something new and novel to sell, such as your locally produced beef. Price isn’t nearly as big an issue for them as it is with large-volume distributors. Again, you will have to weigh the good versus the bad and decide based upon your situation.
If you live within easy driving distance of a city, farmers markets can be great. The investment is minimal, and you get paid immediately. It’s really fun to boot. We always met a lot of nice customers and other vendors with natural products to sell. I would come home after a farmers market with the most wonderful breads, jams, produce and advice on what to do about our dog’s arthritis.
The amount of money that you make is largely dependent upon the area you live in. The farmers markets in Phoenix aren’t very well established yet. People don’t seem to really use them for their regular shopping. We did meet quite a few nice people who became excellent regular customers. We believe that if we wanted to continue with the markets, we would have eventually built up a large amount of business. The amount of money we made in a day would have been fine if it was a half-hour drive for us, but it was more like six hours. Each way. That makes for an exhausting trip. Moreover, it was impossible for us to bring along our toddler son for that many hours, especially in Phoenix’s brutal heat.
Tucson’s markets are a lot better. There is one near an affluent area where a friend of ours sells out each week. It’s only 45 minutes from her home. There are many other cities with huge, very successful farmers markets, so it’s worth investigation.
The laws governing farmers markets vary depending upon where you live. In some areas, the county makes the rules. In some areas it is the state. In some areas you have to comply with the health department’s rules and regulations. Some markets have tables and umbrellas for you to use, free of charge. Some don’t. Some have access to power, some don’t. Some let you sell out of traditional ice chests, some want electric-powered ice chests. They are all different.
We keep it fairly simple at our farmers markets: a folding table (we already had that), a cash box (we bought a plastic one for $6), and two electric ice chests (which we bought at a discount chain for $60 each), that we have used so much that we should have bought them years ago. If you can find them, glass-top ice cream display freezers work very well at farmers markets.
Begin by visiting the markets you are interested in trying. Ask market managers what rules and regulations you need to comply with. The reason for asking the markets and not the government agencies is that every agency always seems to think that they have the authority. I talked to 14 (no, I am not kidding) different people, each of whom insisted that we had to follow a different set of rules. Some of them were downright ridiculous. One told me that we had to have a refrigerated truck and all people manning the booth had to be cleared by his department.
For the real low-down on the rules, ask the market manager or the vendors. They know what works and what doesn’t.
Usually, the operators of the market receive a percentage of sales for providing the space setup and power. This percentage varies by market. I have heard that some charge a flat fee. In any case the charge is very small, usually between 3 to 5 percent.
In many areas you’ll need a business license (so you’ll have the privilege of paying taxes on your sales), and nothing else. We have been told that if we didn’t raise the beef our-selves, it would mean that we are distributors, and insurance is more expensive. Most areas require $1 million in liability insurance. Check with your town, county and state authorities for regulations.
Selling products (or even giving away samples), that are cooked will also get you involved in a different set of rules and regulations (all of a sudden you’re a restaurant), so stick to selling refrigerated or frozen beef unless the market manager gives his approval.
The opening and closing times vary a lot, too. Some are early markets, open from about six in the morning to about noon, and some are geared to the business crowd, open for about three hours in the middle of the day. They expect you to be set up one-half hour before opening, and not leave until the official closing time. You need to make your own change, and have your own bags (here’s a great use for all those plastic grocery sacks). Bring your brochures and print up a big (hand written) price list, and you are set to go. A few ideas to help sales:
• Display your product
• Display pricing
• Give out samples
• Hang a bright, easy-to-read sign
• Be outgoing
Consider publications like The New Farmers’ Market and the Growing for Market newsletter (Resources, p. 88).
We have tried mail order using frozen beef, and it’s difficult in the Southwest, especially in the warm months. It requires very expensive special packaging, and either frozen gel packs or dry ice.
We have found that the packaging and shipping (because you have to ship overnight mail) usually far exceeds the value of the product. The small producer will not have the huge volumes that allow you to negotiate less expensive rates with the shipping companies. A large mail order company such as Walnut Creek can ship a package for $4 that would cost you or me $20.
If you want your product to retain its federal-inspection status, you have to package all shipments at a federally inspected plant. We have tried it, but we have not been able to make it work.
If you are going to offer a shelf-stable product, such as beef jerky, mail order can be a viable option. You can go in two different directions – sending out your own catalogs and filling orders directly, or advertising your beef in an already existing catalog and having them fulfill the orders for you.
If you want to try it yourself, you will need three things: an inexpensive, part-time labor pool, a catalog and a list. The labor pool is usually the easy part. Everyone usually has some teenagers, bored neighbors or someone who would like a little part-time work. It’s not hard work, either – it entails placing stickers on envelopes, stuffing envelopes and filling orders.
You will need to invest some cash into self-advertising. While you don’t need a glossy, full-color, 24-page catalog, you should consider a one- or two-color direct-mail piece that folds to fit in a regular envelope. (It’s a lot cheaper to mail than a larger size.) Include photographs of your products (with food, photos sell better than drawings). Usually, it pays to have the photos professionally shot. Again, the graphic design can be done by that same college student or local print shop, but seek a good printer. Looking professional really counts in mail order.
The hardest part is finding a good list. You can locate a list broker through a company that does contract mailings (look up “Mailing” in the yellow pages), who will charge you so much per thousand names and ad-dresses, depending upon the difficulty he has in targeting the audience you want. For instance, if you merely want to mail to a zip code area that you know is relatively upscale, then that will be fairly inexpensive to obtain. Instead, maybe you wish to mail to males, aged between 21 and 45, with an annual income of over $40,000, who participate in outdoor sports and have contributed money to an environmental organization in the last year. It can be done, but it will be a lot more expensive. Your mailings will be more effective, but you have to weigh the effectiveness against the expense.
When you start out, see if you can lay your hands on a free list that contains your target audience. If you or a good friend is a member of a special interest group such as Californians for the Ferret, it may be a good bet. Remember to always get permission first. It is illegal to use a list without permission.
Using the Internet to advertise your products can be great, as long as you are very specific about the areas you serve. You want to avoid fielding those endless inquiries from for-eign countries that are out of your shipping zones. You can also take orders and pro-cess credit cards on the Internet. When we checked into the start-up costs, we couldn’t justify the costs with our low volume, but, depending on the scope of your business, it might be worth it for you.
If you get your product into an existing catalog, they do all the work. However, you only receive a portion of the sales price. Most catalogs retain 50 to 70 percent of the sales price. Granted, they handle the lists, the catalog, the shipping and all the customer-service details, but they also get a great portion of the cash. For that, they reach thousands more people than you can on your own, so you’ll have a lot more volume. You’ll have to weigh the two factors and see what is best for you.
The big catalogs are notoriously hard to get into. They have huge merchandising departments that receive and analyze hundreds of potential products per day. Even after you convince the merchandising person that your product will sell well, have a decent profit margin, and a low level of customer-service problems, it will be analyzed on a weekly basis for its profit-per-square-inch performance. In other words, a product must contribute a certain profit for each square inch that it takes up in the catalog. Some excellent products may never make it in a catalog just because it takes too much text to explain it properly. The moment it falls below a pre-determined level, it is dropped. Yet, if you have a hot product in a good catalog, it can mean years of profitability.
It is sometimes advisable to get a sales representative when dealing with catalog companies. They are experienced in negotiating the best deal with the merchandising personnel (who can be ruthless), and with moving you to a different catalog if you are not performing well in a particular one. They charge a percentage of the sale.