Farmers markets and CSAs offer path to food business success

NCDA&CS food business specialist Annette Dunlap offers resources that agribusiness owners and food entrepreneurs can use to grow and manage their business. Annette is available for free one-on-one consultations and can assist business owners with financial and market planning through the agribusiness development section. She can be reached at annette.dunlap@ncagr.gov.

Hoping to lure your customers to the shelves in the center of the store? You’ll need to figure out ways to drive your customers directly to your product. A recent article in The New York Times reports that center-of-the-store — those shelves with all of the jars, cans and cereal boxes of shelf-stable items — is losing share to sales of fresh and innovative products on the store’s perimeter.

Fresh produce, meats, specialty cheeses, deli and ready-to-eat are now taking up a more significant portion of a store’s square footage. At one chain, the perimeter now makes up 40 percent of the store’s layout.

So, what does this mean for those of you looking to get placement in major supermarkets?

It’s pretty simple: Stores will stock what sells. If a product is not turning a profit, it gets replaced with something that does.

Consider the challenges to all packaged-food businesses. Even the large food companies are seeing declining sales of shelf-stable items. According to The New York Times article, second-quarter sales for Heinz dropped 2.4 percent and Kellogg’s sales dropped 1.7 percent. Kraft’s first-quarter earnings were down 2.8 percent over the previous year.

Supermarkets rely on volume sales to stay profitable and to stay in business. The average net profit margin for supermarket sales is between 2 and 2.5 percent. For example, if a product sells for $4.99, the store’s net profit (after all expenses have been paid) is about one thin dime.  If the $4.99 product is your barbecue sauce, pickles or chutney, your product needs to turn over frequently enough to prove that it’s earning its keep.

What are some other options?  If you’ve grown enough to guarantee sufficient inventory to be available in supermarkets, pursue that option. Remember to schedule frequent demos and tastings, create a social media presence that stays in touch with your customers and be available when new stores open.

If you’re still in your early growth stages, consider marketing through small-scale specialty stores, farmers markets and Community Supported Agriculture. A USDA report names North Carolina as one of the top farmers market states in the country. Farmers markets also offer you a great opportunity to demo and connect with prospects and to see your customers on a regular basis.  Inclusion in CSA boxes means that you have a guaranteed sale. You can find a list of N.C. farmers markets and CSA farms here.

Volume and increased market share are the keys to business growth. And growth needs to be managed to increase your chances for success. As you review your business strategies, consider intermediate opportunities to increase brand awareness and build customer loyalty. Farmers markets and CSAs, along with small specialty stores, may be just the stepping stone on your path to success.

The department will host two workshops in September geared toward food businesses. At the next Food Entrepreneur Roundtable in Salisbury Sept. 5, experts will discuss brokerage and distribution options for food businesses. There also will be a workshop in Raleigh Sept. 19 focusing on protecting your business during a food recall. Pre-registration is required for both events. For more information and to register, visit the agribusiness development section website or contact Annette Dunlap.

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