for Texas Organic Fruit and Vegetable Growers

Marketing is one of the most important factors in determining the success of any organic farming enterprise. It includes most of the decisions made by producers. These decisions range from determining the most marketable varieties to produce to deciding how to deliver high quality fruits and vegetables to consumers at a profit. However, marketing does not begin after the fruits and vegetables are produced. Instead, marketing alternatives need to be considered even beforeproduction takes place.

Organic fruit and vegetable growers in Texas have several marketing alternatives. Each alternative has characteristics that make it more advantageous for different types of producers. Volume of produce grown, location of the grower, time available for marketing activities, and quality of the organic fruits and vegetables are a few of the important factors to consider when choosing a market or combination of markets to use. Producers may be better able to use or develop more alternatives if they know the major characteristics of each marketing alternative.

Marketing alternatives for organic fruits and vegetables may be classified as direct or non-direct markets. Direct markets involve producer interaction with consumers on a one-on-one basis, and include pick-your-own operations, roadside stands and farmers’ markets. Non-direct markets involve producer interaction with market intermediaries. The non-direct markets include terminal market firms, shipping point firms, processors, grower cooperatives, brokers and retail outlets. In the case of organically-grown produce, primary markets at this time include non-direct markets. When produce cannot be moved through non-direct outlets, then direct markets act as a secondary outlet. The discussion which follows explains the characteristics, advantages and disadvantages of the principal non-direct and direct market outlets for organically grown fruits and vegetables.

 

NON-DIRECT ALTERNATIVESAs mentioned earlier, organic fruits and vegetables may be marketed directly by producers to consumers or non-directly through terminal market firms or wholesalers, brokers, processors, cooperatives, private packing facilities or buyers for retail outlets. The most important factors to be considered when choosing a non-direct marketing alternative are buyers’ needs and requirements and the abilities of the organic producer to meet those needs and requirements. Buyers may desire certain grades and varieties of fruits and vegetables, or require that the fruits and vegetables be packaged in certain containers. Buyers also may demand certain quantity levels for specified time periods. Small-acreage organic producers should be aware of their abilities and shortcomings relative to the needs and requirements of buyers.
Terminal Market Firms

Terminal markets are assembly and distribution centers located in large metropolitan areas. Producers truck their commodities in large amounts to terminal markets, where buyers purchase and then redistribute the goods to local markets. Examples of terminal markets in Texas are the Dallas, Houston and San Antonio markets.

Terminal market buyers typically include large wholesalers and sometimes buyers from local chain stores. Although their requirements may vary slightly, they are generally looking for the following characteristics from their source of supply.

 

• A large volume from one source so they do not have to make many small purchases.
• A dependable supply which will be available over a long period of time so they do not have to keep locating new sources.
• A consistent quality of the product and as high a quality as can be purchased at the market price. They also desire to have a variety of consumer and wholesale packs available from the source so they can meet the varied demands of their retailers.
• A source with an established reputation to minimize the risks of not obtaining the quality and condition desired.

A comparison of the small organic farmer’s situation and the terminal market buyer’s needs suggests that small farms do encounter problems in meeting many of the needs of terminal market produce buyers. These needs include volume, timing, containers, delivery schedules, marketing experience and product quality. Although terminal market buyers do some business with small firms, many have tended to bypass these firms in favor of large producers located in established organic producing areas. This does not suggest that there have not been successful small firms. But these firms have, through application of prior marketing arrangements, overcome some of their problems so they could meet the needs of their terminal market buyers.

Some advantages of terminal markets are:

 

• Current market information is usually available at terminal markets.
• Growers have opportunities to contact several potential organic buyers.
• Growers may sell large quantities fairly quickly.

Disadvantages commonly associated with terminal markets are:

 

• Buyers usually accept only consistently high quality produce.
• Buyers may sometimes have very strict packaging requirements.
• Prices of organic produce are based on current retail market prices so they can fluctuate widely over time.
• Producers must usually transport their produce to the terminal market.
• Producers must deliver organic produce to terminal markets in relatively large quantities.

Shipping Point Firms

Shipping point sales are those made by the organic farmer to a local shipping point buyer, who in turn sells the fruits and vegetables to terminal and wholesale market buyers. Shipping point buyers, may be area packinghouses, produce distributors or other handlers such as buying offices for large chain stores. For successful marketing of organic produce, grading and packing is required by most buyers. Packing facilities provide these services for growers and may also harvest, help manage field operations, deliver to buyers and lease production equipment.

Advantages of dealing with shipping point firms are:

 

• Growers have the ability to market large volumes through pooling and do not have to establish a terminal market sales program of their own.
• Shipping point buyers may provide guidance on grades, container sizes, etc.
• Produce may be sold to sources not otherwise available to producers.

Disadvantages of dealing with shipping point firms are:

 

• Prices received depend on the facility since the firm has limited information on organic market prices and conditions.
• The firm does not develop terminal market outlets of its own.
• The bargaining position of the organic grower may be weak, especially if there are a limited number of shipping point firms in the area.

Brokers

Brokers are individuals or firms which neither take title nor possession of the organic fruits and vegetables but serve as agents to negotiate sales contracts between buyers and sellers. Some sellers rely on brokers entirely, while others use broker services in a supplemental fashion with their own sales and procurement staff. Brokers try to locate the best quality fruits and vegetables at fair prices for both buyers and sellers and inform each party of terms, conditions and special agreements of proposed contracts. Brokers may also handle invoicing, collections and remittance, but brokers are not responsible for payment if buyers fail to honor a contract.

There are two types of brokers involved in the exchange of fruits and vegetables: buying brokers and selling brokers. Buying brokers are individuals or firms that arrange sales between terminal markets and local retailers. Selling brokers arrange sales between local growers and terminal market buyers. With modem forms of communication, buying and selling brokers may be located in shipping point or terminal wholesale markets.

Some grower characteristics that brokers look for in clients are the ability to supply organic produce over a long season, consistently high quality, large volumes from one source and experience in growing organic produce. Brokers generally investigate growers’ reputations to see if they have the needed production experience to meet the terminal market buyers’ requirements. Although brokers handle the sale of produce, producers retain responsibility for most of the marketing functions. Producers are still responsible for the production, handling, assembling, grading and packing activities.

Advantages of selling through a broker are:

 

• Growers obtain the services of a professional produce salesman and have access to a large number of buyers.
• Brokers provide needed price information.
• Producers are not responsible for the selling function, which reduces personnel overhead for selling.

Disadvantages of selling through a broker are:

 

• Products must be homogeneous and able to be graded, but grades may not represent sellers quality.
• Producer’s volume may be inadequate and cost of brokerage sales is high if large volumes are handled.
• Producers remain responsible for product delivery and quality.

Processors

Other non-direct marketing options for producers are fruit and vegetable processing plants. These plants have the capacity to process large quantities of produce. However, at this time, there are a very limited number of processors specializing in organic products.

Producers usually contract to provide processing plants with a certain amount and quality of organic fruits and vegetables over a certain period of time. However, processors do not contract for all of their produce. Generally, they contract for about 60 percent, purchase 30 percent on the open market, and produce 10 percent of the total quantity needed. This allows processors the freedom to “play” the market and possibly receive the supplies at lower prices.

Good managerial capabilities are essential for a producer to provide the required amounts and quality of produce for a processing facility. Processors may control the production practices through the contracts and their field representatives.

Producer advantages associated with processor contracts are:

 

• Price and quantity contract agreements assure producers of a market.
• Production expertise is sometimes provided by the processor.
• Processors may provide harvesting assistance.

Producer disadvantages associated with processor contracts are:

 

• Prices received may be lower due to less risk.
• Quality standards may be stringent.

Cooperatives

At this time, there are no organic grower cooperatives in Texas. However, with the volume requirements of most produce buyers, cooperatives may develop out of necessity. Objectives of produce marketing cooperatives are to secure higher prices, guarantee markets for produce and reduce input and handling costs for their members. Most fruit and vegetable cooperatives also provide various marketing services for their patrons including harvesting, grading, packing, cooling, storage and transportation services. Cooperatives allow members to bring their produce to one location and pool their produce which allows producers to meet buyer requirements that they often cannot meet by themselves. However, some cooperatives also provide purchasing, pooling, processing and bargaining functions for their members.

Some benefits that cooperatives provide are:

 

• Growers gain benefits of large volume marketings.
• Often a sales specialist is available.
• Growers gain benefits of increased bargaining strength.
• Producers may reduce level of market risk.

Some disadvantages of cooperatives are:

 

• Producers lose some independence by selling through a cooperative.
• Members may only sell through the cooperative when prices are high and then use other marketing channels, which hurts cooperatives’ reputations.
• More experienced, better producers might subsidize inexperienced producers, and, therefore, not reach their profit potentials.

Retail Outlets

Some opportunities exist for small acreage organic producers who are willing to deliver fresh produce to retail outlets. With the popularity of organic produce, some restaurants purchase locally grown organic fresh fruits and vegetables. Small independent grocery stores are also potential contacts for sale of fresh organic fruits and vegetables. Other potential markets may include exclusive hotels. Selling to these markets requires a truck to transport the merchandise, time to deliver to each location (as several will be needed to make delivery cost efficient), and the ability to deal with several buyers on an individual basis. Buyers and sellers usually negotiate prices and delivery times. These outlets require frequent low volume deliveries of a variety of produce. Institutional markets may purchase lower quality grades and not require specific containers.

Producers need to make contact with potential buyers in the winter months before the growing season in order to identify packing, quality, container and variety requirements and to become acquainted with buyers. Contact should again be made with the buyers prior to harvest in order to deliver samples and place orders. Growers should deliver the amounts and qualities contracted on time. At the end of the season, producers should ask buyers what changes would improve the operation. Consulting with buyers allows them to influence the operation and makes them more likely to purchase produce next season.

Advantages of dealing with retail outlets include:

 

• Growers may be paid at the time of delivery.
• Growers can negotiate price levels.
• Packing costs may decrease and special containers may not be necessary.
• Producers replace middlemen in the marketing process.

Disadvantages of dealing with retail outlets include:

 

• Superior quality produce may be demanded.
• Producers need time and extra planning to develop client contracts and deliver produce.
• There is the possibility of high transportation costs per unit volume.

 

DIRECT MARKET ALTERNATIVESOther markets that organic growers utilize are direct markets. Most organic growers tend to use direct markets as secondary marketswhen non-direct outlets are exhausted. Whether direct marketing occurs through farmers’ markets, roadside stands or pick-your-own operations, it is an approach which is usually beneficial to both producers and consumers. When producers choose to use a direct market, they want to capture the retail dollar that consumers pay at other markets. If growers expect to receive prices similar to those at retail outlets, they must provide the same services as other retailers and wholesalers. At a retail store, the price consumers pay for produce generally covers the cost of producing, grading, packing, transporting, wholesaling and retailing fruits and vegetables. In order to receive higher net returns, producers try to provide all the marketing services at a lower cost, provide services which are not available through other markets, and eliminate certain unnecessary services. Consumers, on the other hand, purchase from direct markets to buy high quality fresh fruit directly from producers at competitive prices.

Besides providing a financial exchange arena for both producers and consumers of fresh produce, direct markets also provide social settings for these individuals. Producers have the opportunity to discuss production practices and the use of different types of produce, and to socialize with friends, neighbors and consumers. Consumers have the opportunity to visit a local farm and talk with others who share similar interests.

Although direct marketing seems to provide an opportunity for producers to receive higher net returns, producers should consider the amount of additional time and effort, the required production knowledge and the needed retail sales experience associated with direct markets. Direct marketing may require producers to work long hours, do a variety of work and deal with various types of people in a pleasant manner. Much of the time required to operate a direct market is spent with customers. Organic producers should talk with customers to promote positive attitudes and goodwill. Producers also should realize that the sales time required to operate a direct market may take away from production activities. Many times other family members are in charge of the retailing portion of the direct marketing operation, so the grower can manage the production activities of the operation.
Pick-Your-Own Operations

Pick-your-own operations (PYO) are a type of direct marketing outlet where consumers come to the farm and harvest the fruits and vegetables themselves. PYO is often preferred by consumers who like to select fresher, higher quality fruit at lower prices. Also, many consumers enjoy picking produce themselves as a recreational event or family outing.

Some areas that are very important to the success of PYOs are crop diversity, quality, advertising and promotion. PYO operations are often more successful if they provide a variety of produce. This is especially true if there are a number of similar operations in the area. In order to encourage repeat sales and goodwill, it is important that PYOs consistently provide high quality organic fruits and vegetables. Advertising and promotion are critical to PYO success, since consumers learn about an operation’s existence and what produce is available from these efforts.

A major concern of PYO operators is liability. Producers increase their liability by inviting the public to come on their property to pick produce. Generally, producers should be concerned about the safety of children and older people who are more likely to be involved in an accident. It is a good idea to post a sign, “Not Responsible for Accidents,” but this does not free the owner from liability. Insurance is important to the PYO business to reduce these risks to a tolerable level. Producers should contact their insurance agents when they consider a PYO operation, and have their policies appropriately adjusted. The liability policy should cover liability judgments, expenses in supplying relief at the time of an accident, costs of defending against lawsuits, the owner’s expense in the investigation, defense or settlements, and costs of court bonds or interest on judgments delayed by appeals.

Producers also can take their own measures to ensure customer safety and reduce liability by fencing dangerous areas, keeping chemicals and machinery locked up or away from the public area, and keeping animals tied or penned away from production sites.

General advantages of PYO operations for producers include:

 

• The requirements for harvest labor are reduced.
• Grading, packing and storage costs are eliminated.
• Producers receive payments for the organic produce directly, eliminating middlemen.
• Container costs are reduced if the customer provides them.
• Price variability risks are reduced and the producer has more input into the price received.

Potential disadvantages to the producer are:

 

• Producer assumes liability for any accidents.
• PYO operations require long hours during the harvest season.
• Producers must assume retailer services and responsibilities.
• Bad weather or lack of customers may adversely affect returns.
• Customers must be attracted to the PYO site.

Roadside Stands

With roadside stands or markets, a grower establishes a selling place (stand) near a roadway and sells organic produce directly to consumers. Roadside markets vary from small firms selling one or two products on a seasonal basis to firms selling a diversified product mix. The roadside stand is usually located on or near the farm or orchard. Produce sold in a roadside stand may be grown exclusively on the farm or may be purchased from outside sources. However, the roadside stand operator should ensure that purchased produce meets all certification standards.

A roadside stand may be open only during the harvest season or throughout the year, depending on the type of produce marketed and supply sources. Facilities may be elaborate permanent structures or mobile units such as trucks or trailers.

Producers use roadside stands to help supplement their incomes, provide employment for family members and dispose of extra produce. Besides possible financial benefits from establishing an outlet for their fruits and vegetables, producers may also enjoy the customer exchange process, receive a sense of personal pride and independence from the operation, and gain satisfaction from growing and selling quality organic fruits and vegetables.

Consumers shop at roadside stands in order to purchase fresh, flavorful, high quality organic produce in a convenient, friendly atmosphere at a reasonable price. Besides quality and price, other factors that draw people to roadside stands are convenience, advertising and recreation. Some problems consumers experience shopping at roadside markets are the distance to the market, heavy traffic, variable quality and inconvenience caused by out-of-stock produce. If producers can solve or minimize these problems then repeat customers may be established for a market.
Farmers’ Markets

Farmers’ markets are an increasingly popular form of direct marketing. Producers come to a designated place to sell their products directly to consumers. Farmers’ markets differ from other direct marketing operations in that growers share insurance, advertising and other marketing costs. Successful farmers’ markets are very helpful in increasing the incomes of small farmers who participate in them.

Farmers’ markets range from large permanent facilities such as the Dallas farmers’ .market, open 7 days a week, to a tent in a parking lot open for a specific time period seasonally or throughout the year. A market may be operated by a grower organization, community development groups or state and local governments. Consumers patronize farmers’ markets for a variety of reasons which generally include:

 

• They wish to take advantage of lower prices.
• They prefer fresher, higher quality produce.
• Farmers’ markets offer a wide variety of produce to choose from.
• Produce is available in large quantities for canning and preserving purposes.
• They enjoy the market atmosphere and conversing with produce growers.
• They like to support local agriculture.

Producers who utilize farmers’ markets usually fit into two categories: commercial (full-time) growers or part-time farmers. Full-time growers use the market as an alternative market or, in the case of the part-time or hobby farmer, as a viable market outlet. In order to participate in a farmers’ market, producers need transportation to the market site, selling tables, a cash box or register with change, a sales and tax record book, organic produce and price display signs, various containers, certified scales or other measurement devices and sales people. In order to be successful sellers at a farmers’ market, producers need to attract customers to their stalls. Some ideas to help draw customers are to talk with people as they approach the stall, be friendly and courteous, guarantee produce, use honest weights and measures, offer volume discounts, display pictures of preparation suggestions for unusual produce, and use business cards with the operations name and location. It is essential that organic producers display all organic certification signage to assure customers that they are purchasing high quality organic produce.

Producers should carefully plan production of organic crops that are to be sold at a farmers’ market. They should try to grow a wide variety of crops for availability as early in the season as possible. Growers also should try to have crops throughout the season so more customers will be attracted to the market and to their stalls. If a grower consistently supplies desired produce before other growers, then consumers will be more likely to shop at his stall.

Major advantages to producers who sell at farmers’ markets include:

 

• Producers have limited liability for customers since they are not on the farmer’s premises.
• Parking space, restrooms and other facilities are not the farmers responsibilities. These facilities are provided by the market.
• Attracting customers is a function of the market and farmers do not have to worry about advertising individually.
• Since a number of producers (usually more than ten) sell at the same market, continuous supplies by an individual producer are not so critical.

Some of the disadvantages include:

 

• Time required to transport and sell at the market takes away from the farm operation.
• Producers may have to rent a stall for the year when they need it only a few weeks. At some markets, the producer can sell only produce grown on his farm.
• Market hours are controlled by the policies set for the farmers’ market which may not be ideal for individual producer. Also, advertising, or lack of it, is controlled by the market.
• Markets that are poorly located may not attract consumers and peddlers may operate to depress price. This situation is particularly prevalent in the larger and older city markets.

 

SummaryCareful evaluation of potential buyer needs before making production decisions can aid organic producers in choosing market outlets appropriate for their marketing plans and overall operations. Producers need to know quality, quantity, packaging and delivery requirements of potential buyers, and must carefully consider their abilities and limitations in meeting these needs.

 

Contact PersonnelThere are several sources of information on potential organic produce buyers. Growers may consult the produce Red Book (call 800-252-1925 for information) for cross indexes (including phone numbers and addresses) of wholesalers, brokers and other buyers of organic produce. The same type of information may be found in the Blue Book (call 312-668-3500 for information). Both resources are used extensively by leading participants in the produce industry. Either or both are valuable marketing references, though their cost is sometimes prohibitive for small-scale growers.

Following this section is a list of potential buyers of organic produce. All segments of the industry are represented, including potential contacts within and outside of Texas. The list was compiled from mailing lists supplied from the Texas Department of Agriculture and from personal contacts made during the development of this handbook. The list is not all inclusive, but does provide a basis for analyzing potential markets as outlined in the planning procedures section.

 

References

1. Alternative Agricultural Enterprises: Fruits and Vegetables, Cooperative Extension Service Publication, Oklahoma State University.
2. Marketing Alternatives for Small-Scale Commercial Vegetable Growers, Cooperative Extension Service Publication AEC-39, University of Kentucky, October 1986.

Organic Retailers and Distributors

 

HEB Produce Procurement P.O. Box 18020 4710 N. Pan Am Expressway San Antonio, TX 78218-0200 (512) 662-5351	Nancy Jones ORGANICLY YOURS P.O. Box 186 Riverside, NJ 080750186
TEXAS HEALTH DISTRIBUTORS Produce Procurement 501 Waller St. Austin, TX 78702 (512) 473-2173	ANGELICA’S FOODS AND HERBS Attn: Ali 147 First Ave. New York, NY 10003
Joe Mendez-Organic Buyer BIG STATE FOOD SERVICE 1500 S. Zarzamora St. Unit 418 San Antonio, TX 78207 (512) 226-1221	Al Bertel FINEST FRUITS INC. – Row 260-265 Hunts Pt &;E. Bay Ave. Bronx, NY 10474 (212) 893-5410
Jim Cleaves CAPE ANN FOOD CO-OP 26 Emerson Ave. Gloucester, MA 01930 (617) 281-0592	Alan Berry HAPPY CO-OP WHOLESALES 32 Catalta Ave. Lynnbrook, NY 11563 (516)887-1784
Henry Wainer SPECIALTY PRODUCE 2301 Purchase St. New Bedford, MA 02746	Bob Berch CINAGRO PRODUCE 166 Public Market Rochester, NY 14609 (716) 232-6824
Smith/Redfield, Stewart/Sarah SIMPLY PURE FOODS, INC. Rt. 3 Box 99 Bangor, MA 04401 (207) 941-1924	Peter Larkin FOOD MARKET DISTRIBUTORS 1750 K Street Washington, DC 20006
Susan Smiley EARTH’S BEST BABY FOODS P.O. Box 887 Middlebury, VT 05753 (802) 388-7974	Kristi Johnson ORGANIC FARMS INC. 10726B Tucker St. Beltsville, MD 20705
FISHER FOODS MARKETING, INC. 1365 Cherry Ave. N.W. Canton, OH 44714 (216) 453-7697	Paula Dingman, Produce Buyer AMERICAN PRODUCE CO. 4721 Simonton Dallas, TX 75244 (214) 233-5750
Wayne Wilson MID-WEST ORGANICS 1310 South Elizabeth Kokomo, IN 46902	Norma Floyd NEW PERSPECTIVES 2343 University Blvd. Houston, TX 77005
Dr. Joe Rogers SAFEFOODS INC. 20189 Northline Taylor, MI 48180 (313) 287-2131	Bill Bushell SCHOENMANN PRODUCE CO. 3173 Produce Row Houston, TX 77023 (713) 923-1864
Michael McClatchey EDEN FOODS 701 Tecumseh Clinton, MI 49236	Gene Chase STOLLER, INC. 8582 Katy Frwy. Suite #200 Houston, TX 77024
Kevin McCrea McCREA MARKETING 3255 Hennepin Ave. South Suite #80 Minneapolis, MN 55408	Mary Mahaffey HEART OF TEXAS PRODUCE CO. 777 Shady Lane, #11 Austin, TX 78762 (512) 385-4321
Fred Damron FLEMING COMPANIES INC. 6301 Waterford Oklahoma City, OK 73126 (405) 841-8396	Ruby Keegan CARR’S SPECIALTY FOODS 3409 Greybuck Road Austin, TX 78748
GOODMAN PRODUCE CO. 1412 Parker Dallas, TX 75215 (214) 421-7700	Debbie Janek TENDER LOVING CARE ORG. GARDENS Rt. I Box 164 Weimar, TX 78962 (409) 263-5160
Peter LeCompte PIEDMONT FARMS, INC. 1100 W. Co. Rd. 72 Wellington, CO 80549 (303) 568-7654	David Seinstein JBJ DISTRIBUTING INC. P.O. Box 3270 La Hambra, CA 90632 (714) 992-4920
Bob Laffen THE MARKETPLACE 808 Early Street Santa Fe, NM 87501 (505) 988-2729	Kate Castagnola GREENLEAF PRODUCE 1980 Jerrold Ave. San Francisco, CA 94102 (415) 647-2991
Harold Niefield FRESH ADVANTAGE 1000 S. Wall St. Los Angeles, CA 90015 (213) 746-2472	Bu Nygrens VERTIABLE VEGETABLE, INC. 1600 Tennessee San Francisco, CA 94107 (415) 821-1450
Dino Iacovino TAVILLA SALES CO. 1225 Wholesale St. Los Angeles, CA 90021 (213) 622-4435	PURE SALES INC. P.O. Box 8708-702 Newport Beach, CA 92658 (714) 540-5455
Dennis Bronson MOUNTAIN WHOLESALE PRODUCE 3141 E. 12th Street Los Angeles, CA 90023 (213) 264-0595	Bonnie Campbell OCEAN ORGANIC PRODUCE CO. P.O. Box 570 Moss Landing, CA 95039 (408) 722-1166
Bo Mesing RAINBOW NATURAL FOODS DIST. 3055 E. 12th Street Los Angeles, CA 90023 (213) 260-7177	Peter Young ORGANIC MATTERS PRODUCE CO. 303-A Salinas Road Watsonville, CA 95076 (408) 728-0644
Albert Lusk ALBERT’S ORGANICS INC. 4605 S. Alameda Ave. Los Angeles, CA 90058 (213) 234-4595	Michael Funk MOUNTAIN PEOPLES WAREHOUSE 110 Springhill Blvd. Grass Valley, CA 95945 (916) 273-9531
Susan Kravit FARMER’S WHOLESALE COOP P.O. Box 7446 Olympia, WA 98507 (206) 754-8989