Opening doors to large markets for small farmers

Business leaders speaking at the Practical Farmers of Iowa conference argued that their customers are demanding local foods from identified local growers. The challenge? To strengthen marketing channels, build a supply chain… and tell the farmer’s story well.

By Darcy Maulsby



Posted MARCH 6, 2003: If you are a small producer, how do you gain a competitive advantage in the U.S. food industry?

Visionary business leaders say smaller farmers can take advantage of emerging opportunities that connect growers with consumers. And it’s not just grassroots organizations that are promoting this message. Corporate America is getting involved, too.

While more work must be done to strengthen and create more marketing channels for small producers, it can be done, agree Rick Schnieders, president and CEO of the Texas-based SYSCO Corporation, and Michael Rozyne, managing director of Red Tomato, a New England marketing group.

“The demand for unique food products continues to grow, and there’s a huge demand for variety. In the end, your business and mine have a very important role to play. We’re not just raising and selling calories. These products are about memory, romance and trust. Consumers will pay more for sustainable ag, if we can share the story with them,” said Schnieders, one of the keynote speakers who spoke to nearly 400 participants at the Practical Farmers of Iowa (PFI) annual meeting Jan. 25.

"We’re not just raising and selling calories. These products are about memory, romance and trust." - Rick Schnieders, president and CEO of the SYSCO Corporation

Schnieders should know. The Iowa native, whose father operated a small grocery store in Remsen for more than 40 years, maintains a strong commitment to independent, smaller-scale farmers.

“About 95 percent of our business comes from restaurants, colleges, nursing homes, schools and hospitals. I think there’s a larger opportunity for locally-grown foods in the foodservice industry than in retail. And the foodservice industry is based on differentiation,” Schnieders said.

Smaller farmers are ideally suited to producing these specialty products, Rozyne added. “Red Tomato has worked with apple growers from states like New Hampshire, New York, Massachusetts, Connecticut and Vermont. We can offer 30 varieties of apples, many of which are heirloom varieties. Tradition suppliers usually can only provide four or five basic kinds of apples.”

Sharing the farmer’s story
As CEO of SYSCO, Schnieders is positioning the company to take advantage of the growing consumer demand for food products raised in a sustainable manner. This is a new trend for a large corporation like SYSCO, North America’s number-one foodservice marketer and distributor.

“To give you a sense of how large SYSCO is, in fiscal year 2002, the company reported $23.4 billion in sales. We provide more than 300,000 products to approximately 415,000 customers. We have 149 locations across North America and have had more than 26 years of sales and growth,” Schnieders said.
Companies like SYSCO know that 50 percent of the consumer’s food dollar is spent on food prepared away from home. “This trend is being driven by duel income earners, the increasing demand for convenience, and an aging population,” Schnieders said.

Smaller farmers have a unique selling point that can help them tap into this market. “These consumers have lost trust in big corporations. But food that is produced in a sustainable way by smaller growers is in demand. In this cynical world, that is making a difference and is rebuilding trust. The key is to capture the magic and the memories from the farm and share them with these consumers.”
In New England, food brokers like Red Tomato, a not-for profit marketing organization, have tried to make it easier for supermarkets to support local farmers and help share their stories.

“Our role is to help our customers differentiate themselves from the competition. Even big players feel small when they compare themselves to competitors like Wal-Mart. We can help them differentiate themselves by telling farmers’ stories. We have hung posters with our farmers’ photos and stories in the grocery stores to help these businesses say, ‘we’re in business with small, local farmers. You may not know these farmers’ names, but you’ve heard of their towns,’” Rozyne said.

Red Tomato is not a cooperative, but its network helps farmers sell their produce through independent grocery stores, natural foods stores and large grocery chains. The growth and success of Red Tomato has depended on an ability to tap into consumers’ growing desire to purchase high quality, fresh, locally-grown produce.

"It’s like climbing a mountain—we succeed and cross the peak, but then we hit another peak." - Michael Rozyne, managing director of Red Tomato on developing markets for local growers.

What may appear to the consumer as simply tasty, local produce is meant to preserve the farmer, sustain functioning open space, advocate land stewardship, and develop stronger local economies. “By supplying the highest-quality produce consumers can buy, the social and environmental benefits from this type of farming become the icing on the cake,” Rozyne said.

Red Tomato’s advocate role is a concept that Rozyne adapted from his former job as co-founder of the fair trade coffee company, Equal Exchange. The fair trade model promotes paying farmers at least enough to cover production costs. In return, the producers provide high quality goods and use farming practices that are environmentally sustainable.

Both Rozyne and Schnieders agree that developing systems to connect local growers with consumers is a challenging process. Through the years, Red Tomato has had to overcome the loss of large customers, inadequate trucking systems, high distribution costs and more.

“It’s like climbing a mountain—we succeed and cross the peak, but then we hit another peak. When we grew beyond just being a tiny, niche supplier, we hit a peak as others looked at us as a competitor. Reinventing local food systems is something we’ve had to do every year,” Rozyne said.

Finding workable solutions

Three important steps are needed to help farmers cross those peaks that Rozyne described, Schnieders said.

“First, we need to put in place a quality assurance system. It’s too difficult to set up a different one on each farm, but a great example of a system that works is Niman Ranch pork. Second, sustainable agriculture must build a supply chain, and only a coordinated effort will make this work. Third, it’s important to think through the marketing—how do you communicate your story to the consumer? Even a restaurant menu is an opportunity to connect consumers with the farmer. You also need to know which items are selling and which aren’t, and communicate this message back up the supply chain.”

States like Iowa need to support sustainable agriculture, Schnieders emphasized. “We need to find a way to connect the dots, to support a cooperative effort that creates a workable infrastructure for bringing locally-grown food to consumers. There will always be big growers and packers, but there’s a need for locally-grown niche products.”