Selling your farm products to institutions such as schools, hospitals and nursing homes can be a very challenging—yet rewarding—experience. This market gives you the opportunity to sell large quantities to a few customers, thus reducing labor and delivery costs. Sales to institutions may also help to increase your sales at other marketing outlets due to your increased exposure in the community.
Keep in mind that institutions typically purchase products wholesale and, in general,expect lower prices than you would receive at farmers’ markets. Selling to institutions also requires time and effort to establish and maintain business relationships with food service managers. When dealing with institutions, farmers generally do not receive payment on delivery and may need to waitas long as 30 to 90 days before invoices are paid.
Farmers who wish to sell to institutions will also be required to carry general liability insurance. The amount of coverage variesfrom $1 million to $5 million. You will need to consider this cost, as well as delivery, production and related expenses when looking at institutional markets and yourpricing structure. Before entering this arena, take the time to understand the institutional market’s unique dynamics.
Gathering Additional Information
In addition to meeting the food service director and providing samples and other information, you will also be on a fact-finding mission during your visit. The information that you want to gather includes:
- What is the ordering cycle?
- What are the receiving hours?
- What are the receiving days?
- What are the invoicing procedures?
- How must the product be packaged?
- What are the quality standards?
- Do they currently buy locally?
- What types of products would they be interested in purchasing?
- What are the quantities they use per week?
Having a thorough understanding of the facility’s operating procedures will give you a greater ability to successfully serve the account, build a lasting relationship, and price your product at a level that will assure profitability.