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The deal with food distributors

By connecting with distributors, ambitious small farms are leapfrogging their way into bigger markets. Is this an opportunity for mainstream farms too?

For the Voglers, distributors mean they can focus on the crops that work best for their land and business.

At peak operation, Andrew Vogler was growing 50 different varieties of vegetables, selling at nine different farmers markets around Abbottsford, B.C., and delivering vegetable boxes to 200 customers in the lower mainland.

In other words, his produce farm was a lot like a lot of other startups — a lot of energy was going in a lot of directions, but they were always bumping up against the same bottlenecks.

On the plus side, Crisp Organics, the farm Vogler started with his mom, Willy Arkesteyn-Vogler, in 2009, had developed a following. Vogler had a regular income and satisfied customers.

But he was burned out from managing direct-to-consumer sales. 

“I will miss some of those interactions (and) opportunities to build,” Vogler now says. “But it made sense for us to streamline.”

Five years ago, Vogler started selling a portion of his crop to Discovery Organics, a Vancouver-based distributor that specializes in sourcing organic produce from small family farms. The model proved successful for his farm and he steadily increased the volume of fresh fruits and vegetables that he sold wholesale. 

It can feel like a big step for small producers, who often favour the direct-to-consumer model, establishing CSA programs, setting up booths at farmers markets or selling on the farm. 

Besides, going direct has actually has a lot going for it. The demand for local foods has made it easier for growers to connect with customers. Direct marketing also offers advantages, including higher retained net income as a share of gross income thanks to higher prices on smaller quantities.

This was our fifth year, and it was the first time we felt comfortable,” admits Andrew Vogler who farms with mother Willi. photo: Dale Klippenstein

But there’s also no question that direct-to-consumer sales are more labour-intensive. More than that, they can also force the farm to produce more products so it has enough of what the consumer wants to keep them coming back. It all puts increased stress on producers, and it’s these stresses that are leading growers to form partnerships with distributors to sell at least a portion of their harvest.

Exploring the options

A distributor may be a light at the end of the tunnel. Combining wholesale and retail strategies can help reduce risks, according to a Nova Scotia Department of Agriculture report, Guide to Marketing Channel Selection. Distributors can help diversify income and provide consistent demand, and they can cut labour that would otherwise be going into setting up market booths or packing multiple CSA boxes.

The distributor sector, meanwhile, is evolving too. For instance, Nicola Irving signed on with SPUD as early as 2009 to sell Irving’s Farm Fresh pork products. SPUD is an online supermarket that delivers products grown and raised on Canadian farms. 

Prior to working with a distributor, Irving, who raises Berkshire pigs in Round Hill, Alta., sold almost all of her sausage, bacon, ham and other pork products at farmers markets and through an on-farm store. She appreciated the higher margins for direct-to-consumer sales and the fact that customers paid at the time of purchase, but she also recognized that a distributor relationship could have its benefits.

“What SPUD, and the other places that work with small producers do, is ask for our price and see if it will work for them to mark it up and make a profit and not outprice it in the market,” she explains.

For Irving, there were two immediate benefits. “There was no haggling over the price,” she says, “and it also expanded our reach.”

Nicola and Alan Irving got two immediate wins: an end to price haggling, and a much wider market. photo: Carla Lehman Photography

Some customers still want direct, she finds. “Maybe they want to come to the farm store and see what else we’ve got, or order a whole pig for the freezer instead of a few pork chops.”

During the decade she has been selling through SPUD, Irving has also signed on with other small distributors, and she notes these relationships proved especially beneficial during the pandemic. 

At the same time that farmers markets were shutting down and customers were sheltering in place, leading to declines in direct-to-consumer sales, online grocery shopping spiked and distributors needed more product than ever.

“What we were supplying (to our distributors) pretty much doubled overnight,” Irving says. “We lost sales in some of our face-to-face retail but we were selling more through these other channels.”

Same farm, different model

At Crisp Organics, transitioning from direct-to-consumer markets to wholesale helped Vogler to cut back from 50 different types of fruits and vegetables to just 10 staple crops. Growing only beets, carrots, parsnips, celery, celery root, broccoli, leeks, corn, beans and new potatoes is less stressful and labour-intensive than keeping up with a more diversified crop mix.

His cultivated acreage hasn’t changed but the transition has allowed Vogler to increase mechanization, cut back on staffing (and the time it took to recruit and train new workers) and spend fewer hours selling his produce.

“We started out growing a crop here and there (for distributors) and then we increased the number of crops we were offering Discovery Organics,” Vogler explains. “This year was our fifth year (selling to distributor) and it was the first time we felt comfortable moving away from our other sales channels.”

As of 2021, Vogler is selling 100 per cent of his fresh produce through distributors. 

Brody Irvine, purchaser for Discovery Organics, says he has talked to a number of producers who prefer working with distributors because it allows them to shift their business to less intensive production and sales methods. Irvine believes that wholesale markets not only allow diversification, they may also be more predictable than farmers markets and restaurant sales. 

“Wholesale markets are pretty stable … and we can tell a grower with relative confidence that if they grow 1,000 pounds of green beans every week through the summer, you can count on having a market,” Irvine explains. “You get a more reliable, consistent movement of your product.”

Transitioning from direct-to-consumer markets has allowed Crisp Organics to increase mechanization, lessen the time to recruit and train new workers, and spend fewer hours selling produce. photo: Dale Klippenstein

A fit for diversification?

While there are significant advantages to working with distributors, not all producers are well-suited to the model. If you’re just starting out on a diversification scheme, for instance, you may face a hurdle. Most distributors, including Discovery Organics, want to partner with producers who have several years of experience to ensure they can deliver sufficient quantities of produce or proteins. Quality is important too. 

In fact, Justin Vanderploeg, owner/operator of Two EE’s Organics in Surrey, B.C., believes that the field-grown produce he sells through several different distributors has to be even better than the produce sold at local farmers markets.

“When you’re selling to distributors, you’re not there when a customer takes it off the table so your quality control has to be a lot tighter ... your produce has to speak for itself,” he explains. At the farmers markets, by contrast, “the customer who comes to the table is willing to hear your story that it looks a bit different because of X, Y, Z but it still tastes super sweet. Through a distributor, you don’t have that opportunity to sell.”

Vogler had a lot of experience growing produce when he started supplying fresh vegetables to Discovery Organics but he was unable to grow cauliflower that met strict standards for the wholesale market. 

“We had to get comfortable grading out products we wouldn’t normally have to grade out,” he says. “We might be able to bring a small cauliflower to the farmers market … but in the grocery store, they are buying cauliflower by count and need them to be a consistent size and colour.”

Selling to distributors means that producers must also be able to comply with labelling requirements that aren’t needed for direct-to-consumer sales. For Irving, it meant all products had to be processed in a commercial kitchen and list product information, allergens and ingredients. 

The Nova Scotia Department of Agriculture report notes that the grading, packing and delivery requirements can make working with distributors more stressful. Moreover, distributors can be demanding when it comes to prices, deadlines and logistics.

For Irving, who still generates 60 per cent of her revenue from farmers markets, on-farm sales and restaurant accounts, working with distributors has become an essential part of her business model. The extra work, she believes, is worth it.

“(Distributors) are reaching customers that I couldn’t reach,” she says. “If you want to service more customers and reach more customers than you’d ordinarily reach, it’s a good way to expand your business.”

Five questions to ask distributors

If you’re thinking of linking up with a distributor, here are five questions to ask before signing on the dotted line:

1. WHAT ARE THE GAPS IN LOCAL SUPPLY?

Every winter, Justin Vanderploeg of Two EE’s Organics schedules calls with distributors to determine which crops he should plant in the spring. Knowing that orders for kale are down but there are limited supplies of hot peppers ensures that the crops he plants will be sold at harvest.

2. WHAT VOLUMES CAN YOU TAKE?

Just like it’s important to know what to plant, knowing how much to plant matters, too. There’s no reason to plant four acres of beets if there’s no market. Distributors know what — and how much of — different produce and proteins their customers want. Understanding standard quantities will help you plan your crop mix and also help you determine if your operation is large enough to play in that part of the market.

3. WHAT ARE THE INDUSTRY STANDARD PACK OUTS AND GRADES?

Brody Irvine of Discovery Organics encourages growers to investigate exactly how their produce should be delivered to distributors. “Certain wholesalers have specific preferences,” so ask distributors about everything from box size, material and weight to grading requirements. The easier you can make their jobs, the more likely they’ll be to place subsequent orders.

4. WHAT ARE THE TERMS?

You need to understand the payment terms. While “net 30” is common, some distributors have longer terms — and not all pay on time. Irving estimates that she writes off at least one bad debt every year and she looks for warning signs, like late payments, that signal a wholesale client might be sinking. 

5. CAN YOU PROVIDE REFERENCES?

Don’t be afraid to ask distributors for references and then call growers to ask about their experiences. “Some distributors will make big promises upfront and, when the (purchase order) comes through, it’s for half the amount you discussed,” Irvine says. Talking to growers with established relationships can help you avoid entering into problematic relationships. 

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