University of Maryland Extension

Non-direct marketing alternatives

Author: 
Ginger S. Myers, Extension Specialist, Marketing, University of Maryland Extension and Kim Rush Lynch, Extension Educator, University of Maryland Extension

Urban Ag home | Table of contents

 Products like jams and pickles can be a good way to add value to produce that would otherwise sell at a low price or go to waste. However, food safety and labeling regulations are much more rigorous for value-added products than for fresh produce. Photo by Edwin Remsberg, © University of Maryland—AGNR Image Library.
Figure 6: Products like jams and pickles can be a good way to add value to produce that would otherwise sell at a low price or go to waste. However, food safety and labeling regulations are much more rigorous for value-added products than for fresh produce. Photo by Edwin Remsberg, © University of Maryland—AGNR Image Library.

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, most processors will expect to purchase produce at wholesale prices, which may only be economically viable for the largest-scale urban growers. Additionally, 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 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 – marketing groups

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 marketing
  • 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 hurt cooperatives' reputations.
  • More experienced, better producers might subsidize inexperienced producers, and, therefore, not reach their profit potentials.

Retail outlets

Large, value-priced retail businesses require large volumes of product at low prices, which is impractical and economically challenging for small-scale urban producers. However, some opportunities exist for small acreage urban producers who are willing to deliver fresh produce to targeted retail outlets.

With the popularity of locally grown produce, some restaurants purchase locally grown fresh fruits and vegetables. Small independent grocery stores are also potential contacts for sale of fresh local 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 specified quality 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.

Back to top
Previous page: Direct marketing alternatives
Next page: Value-added processing for urban farmers

Maintained by the IET Department of the College of Agriculture and Natural Resources. © 2019. Web Accessibility