Many new farmers explore direct sales to consumers as their sole business model. Direct sales offer great potential to secure a high price for your products, but many farmers in Massachusetts are beginning to find the retail market saturated or highly competitive in certain parts of the state. Sales to institutions such as schools, colleges, and hospitals can provide an alternative or additional sales channel. This market has some unique characteristics it is important to understand before contacting institutional customers.
Institutions with cafeterias, such as K-12 schools, colleges, and hospitals, increasingly want to purchase locally grown products. Their purchasing can take many forms: some institutions buy directly from a farm while others purchase through a conventional distributor. Many institutional buyers want to develop a long-term purchasing relationship with a local farm. Institutions buy a wide range of products, from apples and carrots to eggs, dairy, and meat.
Why chose to sell to an institution:
• While schools or hospitals don’t pay retail prices, they often pay a better price than “regular” wholesale customers such as produce distributors.
• Institutions can be reliable customers who pay their bills and promote your farm in the cafeteria or dining hall.
• The demand is high - The number of school and colleges in Massachusetts preferentially purchasing locally grown foods has risen from 12 to over 300 in the last few years. The demand is increasing and there is not currently enough local supply to meet that demand.
Are institutional sales right for your business?
In order to evaluate if institutional sales fit with your business model, consider the following questions.
• Do you already wholesale?
• Do you sell to food distributors, stores, or other farmers?
• Do you have the ability to communicate regularly with schools and track orders?
• Do you have the capacity to deliver or arrange for deliveries?
• Do you have a diversified product list or the ability to buy local products from other growers?
• How does the school calendar fit with your current harvest season?
• Are you prepared to meet potential insurance or food safety requirements?
• Can you provide any light processing of farm products for schools with limited kitchen equipment?
While you don’t need to answer yes to all of these questions, they can begin to help you determine if this sales channel is a good fit for your business. There are many different kinds of institutional buyers. Successful sales relationships require farms and schools with complementary needs. A smaller farm may be more suited to sell to a smaller institution. You can begin to understand the potential volume of a school or institutional account by inquiring about the number of meals served per day, and the number of months they might purchase your products.
For more detailed information about this market and things to consider in advance, you can view a resource guide developed by the Mass. Farm to School Project called, Does it Make $en$e: Evaluating Farm to Institution Sales” online at: http://www.massfarmtoschool.org/resources/farmers/
In addition, Mass. Farm to School Project staff are available to help farms explore this market by providing free individual technical assistance. Contact us at firstname.lastname@example.org for more info.