 |
 |
|
Gordon Gerlach of Path Valley
Farms delivers produce to chef Samantha Withall at Restaurant
Nora in Washington, DC. Photo by Edwin Remsberg. |
 |
SELLING PRODUCT
Sales Outlets
RESTAURANTS
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.
STORES
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
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.
FARMERS MARKETS
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).
MAIL ORDER
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.
DIRECT MAIL
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.
CATALOGS
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.
Previous Section
| Top | Next
Section
|
