Collaborative Marketing for Small Farms ▪ ▪ ▪ ▪ ▪ SELLING and WORKING TOGETHER for PROFITABILITY
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Collaborative Marketing for Small Farms ▪ ▪ ▪ ▪ ▪ SELLING AND WORKING TOGETHER FOR PROFITABILITY INTRODUCTION Collaborative marketing is a realistic Generally, small farms should consider solution for small- to mid-size farms that are temporary, limited-scale collaborative seeking access to larger markets, but are projects before developing substantial unable to individually serve such accounts. business agreements. Such arrangements In collaborative marketing, several like- can be a simple as consignment sales, or as minded producers join together formally to complex as a corporation dedicated to market and distribute farm products, but marketing and distribution. not necessarily under the governance or control of a cooperative. The range of farm products that can be sold through a collaborative group is as diverse SUCCESS FACTORS IN COLLABORATION as the farms themselves: meats, vegetables, Communication: All producers in a forest products, fruits, grains, flowers, collaborative group are known to each other. nursery & greenhouse products, cheeses They discuss issues and opportunities regularly, openly, and honestly. and other dairy products, and livestock. Enhanced market opportunities: The farm Collaborative marketing may influence marketing group should be providing access many areas of your farm. By choosing to to a new buyer or a larger-scale customer. market jointly with other farms, you will Another opportunity would be to access a adjust your planting intentions, harvesting more profitable market channel, maintain a and storage techniques, crop schedule, consistent product supply, reduce risk for a certifications, buyer relationships and many particular buyer, or promote a marketing other farm office decisions. It is not a advantage shared by several farms. decision to be taken lightly. In fact, Improved bottom line: The farm marketing establishing some type of business collaboration demonstrates its strength in collaboration may be one of the more economic terms, with reduced labor and complicated decisions you will make for advertising expenses. your farm. Written terms and agreements: The terms The financial bottom line for family farms is of the collaboration are spelled out in a profitability. Collaborative marketing could written agreement, with limited legalese, reduce your marketing expenses, but it clear terminology, and specific terms. The might not make your farm profitable agreement should be thorough, and easily overall. Fortunately, there are ways for you understood by all the collaborators. to collaborate with other farms for trial Like-mindedness: The essence of periods to assess the economic strengths or collaborative marketing is in having both weaknesses. The opportunities opened up shared goals and shared values, not just through multi-farm marketing need to be being located in the same town or county. tempered with good agreements and Collaborating farms have to agree on the procedures. principles of their marketing strategy as well as how it is executed and how success is to be measured. Creating a Collaborative Marketing Strategy ▪ ▪ ▪ ▪ ▪ DEFINE THE WHO AND WHY DEFINE THE WHEN Farms considering Collaboration requires various individuals to Collaborative business ventures between collaborative work together. The first question to answer farms often have a start date, but less marketing should is exactly who is collaborating. The attention is given to the end date. The end define basic questions of who, worksheet included at the end of this guide of a collaboration can be planned or the why, what, when, gives you a place to write down the names result of changed circumstances or and how the and roles of the participating farm owners. disinterest from one of the parties. collaboration will work. The “why” of collaboration can be trickier. Most collaborations will experience Clearly defined business objectives are the disagreements, and when they do, a dispute key, since it is more than just physical resolution process, or a termination plan can proximity that would draw two or more keep the parties from resorting to litigation. farms to work as one in marketing. The Whether the entity is developed as a joint rationale for collaboration should be clear, venture or a formal corporate structure, part and how it is preferable by the collaborators of forming an effective venture is knowing compared to individual marketing. how to renew, re-affirm, or possibly end it when necessary. Some reasons for collaboration include: .Reduce individual farm marketing DEFINE THE HOW expenses by dividing a single larger-scale This publication introduces several options marketing opportunity across multiple for collaborative marketing. The exact farms arrangements that will make sense for your .Meet expectations of a new buyer and to farm will be borne out of your own specific reduce their risk, while reducing risk to a circumstances. When you are making participating farm preliminary plans to market cooperatively with other farms, discuss your intentions .Maintain product availability by dividing with an independent advisor and production across several farms professionals familiar with your type of farm. .Maximize a marketing advantage shared The discussion and note taking will help by the participating farms answer questions and point you in a DEFINE THE WHAT profitable direction. A collaboration may only involve a select number of products from your farm, or only one product. The products to be marketed from your farm should be explicitly documented, along with quantities, grade, and units. Examples: .Cabbage, three deliveries from mid- August to end of September, U.S. No. 1, 1 lb. minimum per head, 150 heads per delivery, total 450 lbs. .Tomatoes, mixed color, 20-lb boxes, 12 boxes each week July 1 to September 30. .Raspberries, ripe, 50 half-pint cartons delivered on August 16, August 30, September 10, September 18, and September 30, 250 cartons total. 2 Collaborative Marketing Business Structures ▪ ▪ ▪ ▪ ▪ One of the first things many producers assume is that they need to organize a “cooperative” It is for multiple farms to sell together; this is not true. There are several collaboration important to approaches available to farms. Collaborative marketing business structures range from very understand the simple, contract-like agreements to the formation of new corporations. Something as basic collaboration simple as a consignment agreement allows one farm to sell through another’s market business channels. In other cases, it is better to form a full corporation, cooperative, or partnership. structures, along More complicated options take longer to form and involve many legal, business, liability, with their advantages and and taxation considerations. Many small farms will benefit from starting with basic disadvantages, agreements (such as a joint venture or consignment), maintaining independence as an before individual farm, before committing to a more lasting business structure. committing to one over another. The simplest way for two farms to work together in marketing is for one farm to purchase directly from another. If this basic commerce relationship is not adequate for the objectives of each farm, then the farms can consider more formal collaboration options. It is important to understand the basic collaboration business structures, along with their advantages and disadvantages, before committing to one over another. Initiative Collaboration Options to Consider .Joint venture agreement among farms Farms join to supply institutions or .Cooperative formation wholesale buyers .LLC formation .Joint venture agreement among farms Multi-farm CSA .LLC formation .Cooperative formation .Wholesale purchase from partnering Farm market stand sourced farms from multiple farms .Consignment sales .Joint venture agreement among farms .LLC formation Farmer-run processing facility .Corporation structure (profit or not-for profit) .LLC formation .Cooperative formation Food hub .Corporation structure (profit or not-for profit) .Wholesale purchase from partnering Aggregation of product for urban delivery farms .Joint venture agreement among farms New product offering from several .Joint venture agreement among farms small farms .Cooperative formation 3 CONSIGNMENT SALES JOINT VENTURE AGREEMENT Consignment is a common means of selling It is helpful to think of a joint venture as a farm goods on a small scale. Selling by limited-term project, but with more consignment involves a written agreement business and legal rigor than a mere to advertise, display, and sell your product at handshake or verbal agreement. A joint a market you do not own. As the producer, venture is an enterprise created by two or you would still own the product, but the more farms, or between a farm and another other farm would sell it for you. In the business, for a limited purpose and usually consignment agreement, the original with a profit motive. The written producer retains ownership of the product agreement formalizes the expectations of until it sells through the farm stand or store. each farm as well as the duration of the arrangement (anywhere from a few months To make the most of consignment, both the to a few years) after which it terminates or producer and the farm stand owner have to is altered. The farms remain independent maintain good, updated records. Both from each other, except as agreed to in the parties must document all aspects of sales joint venture document. The joint venture and inventory. The producer needs to agreement