We’ve already talked about farm gate sales, local area sales, factory contracts and fresh produce markets. Here, the subject is supplying direct to supermarkets or other buyers.
Farmers often ask me which supermarket to supply. My first question to them is, “What’s the quality of your product, and how much do you have?”
They’ve been told that if one goes to the large supermarket chains, they’ll be only too happy to take your produce. They probably will, but it’s a little more complicated than that.
Last time, we covered supplying your local supermarket. Now we’re going to look at doing supply deals with the supermarket’s head office. This can be totally different.
Good quality. Nobody buys inferior quality. If you don’t have top-quality products, they won’t be keen to buy from you. Try to see it from their point of view. Supermarkets are in a very competitive business and they all want consumers to support them. They know that the best way to ensure this is to have good-quality products.
Continuity of supply. Can you supply on an ongoing basis, according to their needs? If you don’t have sufficient volumes they will have to look elsewhere.
Delivery. Can you deliver the product to their depot, according to their delivery requirements, or must they arrange to collect it from the farm? Running big trucks is expensive, and they don’t want to drive down rough, narrow farm roads unless they can fill their trucks, or at least make it worthwhile to themselves.
Packing and storage. What facilities do you have on the farm? Is there a cold store? Is there a pack house or something similar, which provides protection from the elements, and is the equipment up to the job? You must be able to show them that you have the necessary infrastructure.
Good production practices. In today’s fresh produce business, things like food safety and Good Agricultural Practices (GAP) are becoming normal supermarket supply requirements. You must be able to show that, if you spray chemicals on crops, you’re using the right ones, responsibly. They want to assure customers that the products they sell are safe to eat and are produced under environmentally friendly conditions.
Each supermarket sets its own standards and requirements, which they will tell you if they decide to do business with you. Often, they’ll tell you which varieties to grow, and they’ll give you help regarding production and packing.
They’ll tell you how much they want, when they want it, how it should be packed, and their quality standards.
A supermarket is unlikely to take your entire crop. They’ll take only the best, and you’ll be left with the second and third-grade products. What you do with them is your problem. You can send them to market, but remember that you can’t expect top prices if you’ve given the best to the supermarkets.
Supermarkets are in business to make a profit, and the best way to do that is to buy as cheaply as possible and sell for as much as possible. That’s what every single business tries to do.
You’ll have to decide if the price they offer you, as well as the payment terms, is what you want. You’ll probably have to sign a contract, which means you’ll have a serious legal obligation. You must be sure you can meet it.
And make sure you know who you are dealing with. If, for example, you supply the markets, your money is guaranteed by law, but outside of them, you carry the risk, the same as anybody else. And it can sometimes be very expensive.
Supplying direct to supermarkets might sound wonderful, but be sure you know what you’re doing, that you understand what is expected of you, and that you’re capable of delivering according to their requirements.
- This article was written by Michael Cordes and first appeared in Farming SA.