12, 2006: Independent restaurants, foodservice operators
and grocery stores throughout Iowa say they want to buy more locally-grown
foods. Across the state, a host of Iowa State University (ISU) Extension
staff and other specialists are helping to connect Iowa farmers
with these promising markets.
The farmer-centered business tools and strategies they are developing
can help farmers everywhere identify what to market for commercial
and institutional and how to succeed.
What does it take to partner with SYSCO?
Identifying your intended end-user is the key to success when
you sell to food distributors, said added Craig Watson, vice president
of quality assurance and agricultural sustainability for SYSCO,
a broadline foodservice distributor. “It’s easy to say,
‘This is what I have to sell.’ But what does your customer
want to purchase? If you haven’t identified an end-user and
their needs, your chances of success are lower.”
||It’s easy to say, ‘This is what
I have to sell.’ But what does your customer want to purchase?
SYSCO, which has over $30 billion in sales, will work with farmers
who can show why their product is different and tell the story with
romance and authenticity, added Food Alliance Midwest’s Jim
Ennis, who spoke at the Leopold Center for Sustainable Agriculture’s
recent “Marketing and Food Systems Initiative Workshop”
in Ames, Iowa.
Telling your story to people who aren’t familiar with your
product starts by focusing on what makes you unique and identifying
what messages will hit home with potential buyers:
- Your product is picked at the height of freshness, which creates
a quality eating experience.
- Because the food is locally raised, it doesn’t have to
travel thousands of miles to reach the consumer.
- The farm where the food is grown focuses on sustainable agricultural
practices that protect the environment.
These kinds of points help SYSCO’s marketing associates help
sell your products to independent restaurant owners, for example,
who have to find ways to compete against the national chains, Ennis
said. Getting into SYSCO’s system, however, is only half the
battle, agreed Ennis and Watson. The other half is getting your
product pulled through the distribution chain.
“That’s why you need to understand your end-user,”
Watson said. “If customers aren’t asking for your product,
it won’t move out of the warehouse, and you’ll die on
Understanding customers’ needs starts with knowing what they
want to buy. In 2005, a survey conducted in southwest Iowa showed
that institutional buyers are especially interested in buying tomatoes,
peppers, potatoes, onions, lettuce, eggs, strawberries, apples,
green beans, carrots, beef and two-percent milk.
||While franchise restaurants, movie theaters,
bowling alleys and caterers had little or no interest in buying
local foods, school districts, independently-owned restaurants,
and foodservice providers like senior citizen centers and Meals
on Wheels were interested in buying local foods,
“While franchise restaurants, movie theaters, bowling alleys
and caterers had little or no interest in buying local foods, school
districts, independently-owned restaurants, and foodservice providers
like senior citizen centers and Meals on Wheels were interested
in buying local foods,” said Steve Adams, an ISU Extension
community and economic development field specialist. “By identifying
the products buyers say they want, next we need to pinpoint how
much demand exists and help more farmers supply food to these institutional
Separate research conducted by ISU shows that restaurants, wholesaler/retailers,
and university foodservice appreciate the value of local produce
and are willing to invest in it. These buyers have sometimes had
trouble receiving the quantity and quality of local produce they
need, noted Jason Ellis, an ISU Extension specialist in the Department
of Apparel, Educational Studies, and Hospitality Management.
Contracts: Yes, no and flexible
On the flip side, he found that Iowa produce growers were interested
in selling to brokers or foodservice operators but felt it was risky
to increase their production to provide the quantity and quality
required. That’s where contracts might help minimize both
the producer’s and the foodservice operator’s risk.
In general, foodservice operators don’t use contracts, he
said. “They like the flexibility of calling to order what
they want, when they want, and not calling when they don’t
want anything.” The exceptions are large foodservice organizations
that trade in high volumes, including universities and large hospital
systems, but the agreements aren’t exclusive. In some cases,
70 percent of their food will come from a certain supplier, but
the institution is allowed to purchase the other 30 percent from
other vendors, Ellis said. From a regional produce broker’s
standpoint, a contract may be the necessary tool to prove you’re
a reliable supplier.
On the production side, growers sometimes are reluctant to consider
contracts. Some farmers may not know what price to charge or how
to negotiate pricing, Ellis noted. “Others may feel their
pride is at stake. ‘Isn’t my word good enough? Why do
I need a contract?’ they ask. But if you get into $10,000
or $20,000 worth of sales, you need the assurance from your buyers
that the money will be there.”
||In general, foodservice operators don’t
use contracts. “They like the flexibility of calling to
order what they want, when they want, and not calling when they
don’t want anything.”
Contracts can be flexible to fit your needs and your buyers’
needs. For example, producers can work with their attorney to include
an advance notification clause that they must notify the buyer a
certain number of days in advance if they won’t be able to
deliver the specified quantity and quality of produce. Also, a clause
can specify that the buyer needs to notify the producer a certain
number of days before the next delivery if they won’t need
the set volume.
To help growers analyze whether increased contract production is
feasible, Ellis is also working with specialists in ISU’s
College of Business to develop forecasting spreadsheets for growers.
Perhaps you’re currently producing one bed of carrots on 0.10
acres but have the opportunity contract 10 acres of carrots through
the summer. “This user-friendly spreadsheet will help you
analyze potential expenses to meet the demands of a contract, along
with your return after expenses,” Ellis said. “It’s
a full-cost accounting to see if it makes financial sense to expand.”
Ellis hopes to make this tool Web-based or downloadable from the
Internet by this fall.
Kitchen Project cooks up interest in local foods
Contracts may prove more valuable as enterprises like southwest
Iowa’s Kitchen Project take shape. ISU Extension specialists
and local small-business trainers have developed a business plan
for a home-meal-replacement venture that relies on locally-grown
“The challenge for small and niche producers is to find a
sufficient market so they can be sustainable,” noted Lynn
Adams, an ISU Extension community resource development specialist.
“We want to have a market ready for growers who participate
in the Kitchen Project and help keep the dollars local.”
The demand for a home-meal-replacement
service continues to grow, Adams said. “Dual-income
families have little time to cook, although surveys show that
more families want to share meals at home.
The demand for a home-meal-replacement service continues to grow,
Adams said. “Dual-income families have little time to cook,
although surveys show that more families want to share meals at
home. Also, consumers’ use of convenience foods and fast food
at dinner continues to grow.”
The Kitchen Project is designed to be an LLC (rather than a cooperative)
that’s funded by investors, including producers. Meals (which
would have a price point comparable to fast-food meals) from locally-grown
foods will be prepared in a centrally located commercial kitchen.
The business plan calls for delivering meals six days a week. “There
could be drop-off points like factories, and we could deliver meals
at the end of the workers’ shifts,” said Adams, who
reports that next steps will include forming the Kitchen Project
LLC. “We hope the Kitchen Project will also foster the development
of other new businesses, such as delivery services and a packing
house for produce.”
Frozen assets prove profitable
Are commercial buyers ready for frozen local foods for year-round
menu planning? Yes, reports Kamyar Enshayan, director of the University
of Northern Iowa’s Local Food Project, who surveyed 16 institutions
in the Cedar Falls/Waterloo, Iowa, area. All these buyers expressed
interest in buying locally grown, frozen products (especially frozen
strawberries and corn).
||"Profitability among processed products
varied considerably," said Craig Chase, an ISU Extension
specialist. Most items that required further processing into
jams, jellies, or purees proved more profitable than products
requiring only freezing.
The buyers were after increased sales and customer satisfaction
because of better taste, and six said they would pay more for it.
In response, ISU Extension developed Project Freeze, a small-scale
demonstration project to help farmers supply local corn and strawberries
year-round from 2001 to 2004.
“Profitability among processed products varied considerably,”
said Craig Chase, an ISU Extension specialist. Most items that required
further processing into jams, jellies, or purees proved more profitable
than products requiring only freezing, including whole or sliced
strawberries. In addition, higher-end products like cobettes (cobs
of corn cut in half) for restaurant use were more profitable than
bagged, frozen cut corn.
“The key is to match your product to markets that are likely
to achieve higher prices and margins,” Chase said.
Enterprise budgets maximize income
Chase and his ISU colleagues have also studied central Iowa farmers’
production budgets to help producers boost their profit potential.
Crop budgets were run for asparagus, basil, carrots, cherry tomatoes,
eggplant, garlic, green beans, greens, potatoes, red raspberries,
snow peas, strawberries, sweet potatoes, and heirloom tomatoes.
All except strawberries were developed to represent a 4-foot by
The ISU researchers studied farm income by tracking price and volume
to determine gross revenue. They also factored in pre-harvest expenses
(including seed, fertilizer, labor and other inputs), along with
harvest expenses (including labor, packaging, overhead, machinery
and land). They found that produce that receives a high price on
high yields with reasonable production costs such as heirloom tomatoes,
can net $500 or more. Produce such as sweet potatoes and asparagus
netted only $27 to $35 per bed.
The research shows that producers should have about 70 beds per
acre of produce that can be sold, Chase said. “A reasonable
goal would be to net $70 after total costs per bed, for a total
goal of $5,000 net per acre.”
Of the 14 budgets, basil, cherry tomatoes, eggplant, greens, red
raspberries, and heirloom tomatoes received above average returns.
Strawberries returned approximately
$4,000 per acre above all costs.
To help producers run enterprise budgets, ISU is developing a PDF
tool that can be downloaded from the Internet. ISU Extension plans
to release a publication outlining production budget results in