New tools help farmers explore, exploit and
expand niche markets

By combining data streams on people, location, income and business activity, farmers learn where to focus their marketing efforts for sustainable connections.

By Darcy Maulsby

Posted December 14, 2006: There are great opportunities for farmers with marketing vision as demand for food with a clear connection to the producer continues to outpace supply. The need to break the barriers of selling to direct, retail and institutional food markets—and to develop new tools to help farmers succeed in niche markets—is forging innovative relationships between farmers and buyers at many levels.

Consider Iowa’s new Market Maker (www.marketmakeriowa.com), an interactive, online mapping system designed to link food producers, distributors, buyers and sellers. When the site goes live in early 2007, it will integrate U.S. Census data, North American Industry Classification System (NAICS) codes, global imaging satellite (GIS) location coordinates and data supplied by Iowa farmers. By overlaying this data and technology, buyers and sellers will have the ability to truly target market their sales and purchases to specific populations in specific areas.

As a resource for all businesses in the food-supply chain, this easy-to-use site can help a grocery store find farm-fresh eggs or help a producer find a place to sell his locally-raised pork, said Ray Hansen with Iowa State University (ISU) Extension’s Value Added Agriculture Program.

While the Market Maker project originated through the University of Illinois Extension’s Initiative for the Development of Entrepreneurs in Agriculture program, it’s spreading regionally, and project leaders hope it will become national. Currently there is no fee to use Market Maker.

“This tool should continue to grow in value, especially as other states are added,” said Hansen, who spoke at the Leopold Center for Sustainable Agriculture’s recent Marketing and Food Systems Initiative Workshop in Ames, Iowa. “It will provide a powerful way to build business networks throughout the food chain.”

Site offers user-friendly options

The site’s census data can be queried and used in a variety of ways. If you want to find new markets for a high-end product, for example, you can search the database to generate a map of areas with high-income densities. If your goal is to sell meat to Hispanic consumers, you can request a map showing the greatest concentration of upper-income Hispanic households, and then request a complete demographic profile of those locations.

If you want to find out what businesses or distributors you can supply in Iowa, Market Maker can also help you get a better sense of their needs. “While this isn’t a replacement for a thorough market analysis, it can help you find new opportunities for your products and can make cold calls a lot easier when you have a little background information,” Hansen said.

The site works equally well whether you’re a buyer or a producer, he added. For example, you can request lists of federally-inspected packing plants, along with a map that identifies their location. If you’re a grocery store manager looking for the closest producer of organic vegetables, you can query the web site to find names and contact information. A key-word search function will be added in the future, giving more user-friendly access for specific products.

That’s why it’s so important for farmers to provide the details for their operations, said Hansen, who noted that nearly 300 Iowa producers have signed up in the last few months. “The farmers’ data [set] is the one variable we can’t just go out and get from census records or other sources.

“The producer data is what truly makes this tool unique,” he noted. “We want more producers to sign up so we can promote the site to grocery stores, restaurants and other food buyers.”

For more information on the Market Maker program, call 515-294-0588, or e-mail marketmaker@iastate.edu. You can also log onto www.iavaap.org.

Finding new ways to partner with food distributors

Food distributors also offer a potentially viable—although often overlooked—resource to connect local food producers with consumers. They are a cornerstone of the conventional food system in moving food toward its destination after processing. These companies have safe, efficient systems (including refrigerated facilities) for providing customers with small and large quantities of food in a short time, said Connie Hardy, a program coordinator with Iowa State University Extension’s Value Added Agriculture Program. They also provide a sales force that can get your product recognized by their customers that you couldn’t reach otherwise, such as university food service outlets that use a complex buying process, including contracts with food distributors.

“Most producers don’t have time to work directly with institutional buyers, and vice versa, so that’s where distributors come in,” Hardy explained. “A lot of producers don’t really understand what food distributors do, even though distributors could be a big help to them.”

To foster new connections between growers and food distributors, Hardy and her colleagues recently interviewed 12 Midwest food service distributors. The researchers wanted to find out whether these buyers were accessing locally-grown foods and whether they planned to do so in the future. The distributors included Sysco Corporation, Hawkeye Foodservice Distribution, Harker’s Distribution and Martin Bros.; five retail/grocery distributors including Wal-Mart and the Midwest-based chains of HyVee, Dahl’s, Fareway, and Cub Foods; and four Midwest convenience-store distributors including the Farner-Bocken Company and Casey’s Inc.

The key message from distributors? “We wish producers would ask us what we want to buy before they have the product ready to sell,” they agreed. In fact, only two of the 21 distributors interviewed by ISU’s staff said that producers involve them in planning for the finished product.

That’s why you should talk to a distributor or two to help target what to plant for certain markets, emphasized Hardy, who noted that it’s not unusual for two distributors to have a totally different mix of customers. Learn who your distributor’s customers are, since their buyers could include college campuses, medical institutions, hotels, restaurants, grocery stores, vending machine suppliers or convenience stores. This will give you a better understanding of end users’ needs.

“Heirloom tomatoes might be great for a white-tablecloth restaurant, for example, but most college food service outlets have no desire for these kinds of tomatoes,” Hardy noted.

Distributors seek food with a story

Food service companies stressed to ISU researchers that they know their customers’ unique needs well and buy what their customers want. Distributors also seek new and exciting products, foods with a story, and a consistent, sufficient quantity. Since distributors sell meats, poultry, fish, fresh or frozen fruits and vegetables, dairy products, processed and preserved foods, specialty foods, snacks and desserts, it helps to analyze whether your product can be promoted as a “place-based” local food, an all-natural product, organic, gourmet, or part of a freezer-to-table meal.

In addition, it helps to present an image of your product that piques all the senses so it’s more appealing to both the distributor and their customers, Hardy said. Create a good label design that not only includes the required information but also highlights the unique background of your product. If your salsas are made from a special variety of tomatoes grown in a soil type unique to your area, for example, promote this story on your label to showcase why your locally-grown product is superior.

Even if you follow all these suggestions, however, be aware that it still may be tough to crack the food-distribution market. In some cases, distributors’ customers are currently receiving volume discounts for purchasing certain foods and could lose these discounts if they start buying more locally-grown foods, Hardy said.

It’s one of the reasons that ISU researchers are looking at the need to aggregate food supplies locally, since most farmers by themselves aren’t big enough to supply even one food distributors. “Few farmers have large enough coolers, and I think we’re going to have to look at ways of helping farmers process foods cooperatively,” Hardy said. “We also need to look at ways to make this economically feasible.”

Stabilizing local produce for year-round sales

Bridging this gap between local producers and consumers must address concerns about year-round consistency of supply, added Sam Beattie with ISU’s Department of Food Science and Human Nutrition. “You can’t tell distributors and food service institutions, ‘We have boatloads of tomatoes for you, but only for about two weeks.’”

“You can’t tell distributors and food service institutions, ‘We have boatloads of tomatoes for you, but only for about two weeks.’”

Since the peak of freshness is fleeting, adding a processing step such as freezing would stabilize produce, protect food safety and allow for year-round availability. This is the kind of product that high-end restaurants would like to buy, Beattie noted. “Brett Callison, a chef at Aunt Maude’s—a white tablecloth restaurant in Ames, Iowa—has told us they’d like to take as much fresh and frozen local products as they can get, but they just can’t get the frozen.”

Offering convenience is a key to tapping more food service outlets. “These buyers are looking for products in a form that’s easy to prepare,” Hardy noted. “That means the food needs to be clean, sliced, if appropriate, or frozen, in some cases.”

In the months ahead, ISU researchers will investigate a pilot unit or prototype estimated at $300,000 that would include a blancher and freezing units. They plan to study the economic viability of having a processing system installed in a centralized location where area farmers could process their fresh produce. Facilities that were already set up for food handling, such as abandoned convenience stores, and include features like a sloping floor with a drain that can be steam cleaned could provide a workable solution, Hardy said.

ISU researchers will also conduct studies to determine buyers’ willingness to pay for year-round availability of locally-grown produce. In addition, they plan to conduct surveys in conventional and specialty grocery stores to study the types of canned and frozen foods that are purchased. Researchers are also studying the feasibility of high tunnels and other systems that can extend the produce growing season to ensure an adequate supply of locally-grown foods.

Contracts expand marketing opportunities

Contracts could also help connect more local-foods growers and food service outlets, since these agreements could alleviate buyers’ and sellers’ anxiety about unknown supply and demand levels. “The food service buyers we’ve surveyed want to buy and feature more local products, but they’re not going to invest a lot of time to find these products,” noted Catherine Strohbehn, an Extension specialist and adjunct associate professor of Hotel, Restaurant, and Institution Management at ISU. “Contracts could streamline communication between buyers and sellers to benefit both groups.”

Volume sales to one location could eliminate the need for multiple contracts and farmers market set-up and staffing time. Contracts could address contingencies, such as situations where money has been prepaid and a crop failure occurs.

Contracts may fit especially well with certain food service buyers, such as independently-owned restaurants and some grocery store managers who have fairly significant purchasing flexibility in terms of price and delivery. “There’s a lot of competition, so these businesses want to outshine others in their region,” Strohbehn noted. “Contracts could give these buyers the potential to contract specialty products or unique varieties from local growers.”

For more information on these topics, log onto www.leopold.iastate.edu/research/marketing_files/workshop06/index.htm.