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CITATION THUMBNAILS PAGE IMAGE ZOOMABLE
STANDARD VIEW MARC VIEW
MARKETING--A REQUIREMENT FOR PROFIT-WITH FRESH PRODUCE
John J. VanSickle
Staff Paper 273
Staff Papers are circulated without formal
the Food and Resource Economics Department.
is the sole responsibility of the author.
Food and Resource Economics Department
Institute of Food and Agricultural Sciences
University of Florida
Gainesville, Florida 32611
John J. VanSickle is an Assistant Professor in Food
and Resource Economics, IFAS, University of Florida.
MARKETING A REQUIREMENT FOR PROFIT WITH FRESH PRODUCE
An often heard statement and question made by farmers about growing
vegetables in areas where they are not currently commercially grown is
..."We can grow almost any vegetable that can be grown in other parts of
Florida. How do we develop a market for these vegetables?" The answer to
this problem is not easy. It is true that from a production standpoint
many vegetables can be commercially grown in areas of Florida they are not
currently grown. It is the unique marketing characteristics of fresh pro-
duce, however, that often prevents development of a viable commercial vege-
The purpose of this bulletin is to discuss the unique marketing char-
acteristics of the fresh produce industry and to discuss methods growers
may pursue for developing markets that fit these unique characteristics.
Developing new markets is an age old goal of farmers and others serving
agriculture. This bulletin discusses methods for developing new markets
that require a minimum of structural change in the industry.
Characteristics of the Produce Industry
The commercial produce industry is diverse and complicated. Most
fresh produce must be moved through the marketing channel quickly once it
reaches a mature state to insure the best quality for the consumer at a
fair price for the grower. The distribution system for fresh produce is
very complex. Figure 1 illustrates the typical participants and marketing
channels for fresh produce.
Consumers purchase fresh produce from food service establishments,
supermarkets, other retail outlets, and local markets. Local markets are
those markets where growers market produce directly to retailers and con-
sumers, without the services of a middleman. Local markets include local
retail groceries with local owner-operators, U-pick operations, roadside
stands, and city and local farmers' markets. If growers are considering
the option to grow fresh produce in a new area, the local markets are the
first marketing options that should be considered. Local markets may be
easier to access and develop than markets serving other retail outlets.
Food service establishments, supermarkets and other retail outlets are
generally serviced through regional and national markets. Because of the
diversity of fresh produce handled in these markets, the fresh produce
industry is characterized by many growers (there are many crops, most hav-
ing many growers) and comparatively few commercial buyers. As evidenced by
the complicated marketing channels depicted in Figure 1 between the grower
and these retail markets, it is difficult for growers to develop a market
which can offer the services necessary to supply these outlets. Growers
generally use produce dealers (often called brokers) to arrange the market-
ing of produce to these markets. These dealers are indicated in Figure 1
with dotted lines connecting them to the marketing channel because dealers
primarily facilitate the marketing process by making connections between
buyers and sellers. The role these middlemen play can be very important,
however, in developing a viable market.
161. 34 MARKET LFVEI
FOOD SERVICE SUPERMARKETS AND 11-84%
ESTABLISHMENTS OTHER RETAIL OUTLETS LOCAL MARKETS
2 25 3
i2 7% 1&
INSTITUTIONAL 9 RETAIL INTEGRATED
WHOLESALERS WHOLESALOLESALERS WHOLESALE RETAILERS
TERMINAL 12 2
16 401 40% 4%
S. DEALERS 40% -4
INTEGRATED IMDEPENDENT V-96%
GROWER SHIPPERS SHIPPERS
IMPORTS GROWERS VI-100
Figure 1. United States fresh produce marketing system.
SOURCE: VanSickle, Adrian, and Epperson.
Because commercial buyers desire a steady supply of consistent, qual-
ity produce, these buyers often establish relationships with produce deal-
ers to assure themselves with some degree of confidence that they can ob-
tain the kind and quantity of produce they desire. Growers wishing to sell
produce in regional and national markets will probably need to acquire the
services of a produce dealer. The ability to acquire the services of a
produce dealer depends in large on the volume of produce available for
marketing by the produce dealer. Produce dealers generally operate on a
commission basis and will locate in areas where they believe they can mar-
ket the most volume of produce. Growers wishing to develop a commercial
fresh produce industry are therefore faced with something similar to the
chicken and egg dilemma. Produce dealers will not market produce in a new
area without substantial commitment from growers that an adequate volume of
produce will be available for marketing. Growers, however, cannot afford
to grow produce without some commitment that a reputable produce dealer
will market the produce. The only solution to this dilemma is to coopera-
tively solve both problems at the same time. A commitment must be obtained
from the growers that will satisfy the minimum needs of a dealer.
A grower wishing to develop a market for vegetables should consider
all marketing alternatives that are available. The marketing alternatives
considered should include marketing in local, regional and national mar-
kets. Considerations for determining whether a market is available in
these channels are discussed in the following sections.
Growers considering growing vegetables in an area where a commercial
vegetable industry does not currently exist should first consider the mar-
keting alternatives available in local markets. Local markets can be
easier to access because they can be served'by an individual grower with a
small or large volume of produce. The different local markets that can be
used by growers are discussed in this section.
Local Retail Outlets
Local retail outlets available to growers are generally family-owned
and operated businesses. The chain-store type of local retail outlet usu-
ally has a central purchasing department responsible for supplying many
stores, and therefore does not make a policy of purchasing produce locally.
Owner-operators of family-owned businesses usually purchase the pro-
duce they sell. A grower's ability to supply such stores depends on his
ability to sell both himself and his produce to the owner-operator. The
owner is interested in obtaining a dependable, stable supply of good qual-
ity produce. The advantage to the grower in selling directly to this out-
let is that no produce dealer's fee is paid. A disadvantage is that retail
outlets may handle only a small portion of the grower's total supply and
may therefore take more of the grower's time and effort than it is worth
for the grower to satisfy the retail owner's demand.
Growers wishing to pursue local retail outlets as a viable marketing
alternative must first identify those retail outlets in the surrounding
area that buy their own produce. This can be determined by contacting
produce managers at nearby stores. The grower must then determine the
needs of these buyers and decide if he can supply these needs.
A second method for selling in the local markets is by establishing a
U-pick operation. U-pick is advantageous in that it eliminates the cost of
harvesting and transporting the produce. Many fields are planted with the
express purpose of having all produce sold via the U-pick method. However,
U-pick operations often are set up in fields after it has become unprofit-
able for the grower to commercially harvest and market the produce. A
disadvantage to U-pick operations is that the grower may need to provide
additional management and capital investment to prevent damage to his field
and to provide for fee collection. Other factors important for the grower
to consider are insurance, advertising, traffic control, pricing, and su-
pervision of pickers.
The important factor for determining whether a U-pick operation is a
viable marketing alternative for a grower is location. A grower must be
close enough to a large population that will come to the grower's field to
pick their own produce. If the location is not on a main traffic artery,
the grower will also need to advertise his produce and location through
some popular media in the area.
A roadside stand is simply a retail business that is located in a
producing area rather than in a consuming area. The grower is able to
shift most of the transportation cost to the consumer and avoid the cost of
a middleman when marketing in this local market outlet.
Characteristics which contribute to the success of a roadside stand
include: (1) closeness to a large urban population center; (2) a long
selling season; (3) nearness to a high percentage of year-round residents;
(4) a large acreage available for producing a variety of vegetables, and;
(5) developing repeat customers through goodwill in the operation. Growers
considering a roadside stand as a viable marketing alternative should de-
termine whether they can possess enough of these characteristics to assure
success in growing produce.
City and Local Farmers' Markets
City and local farmers' markets are basically roadside stands that are
located in urban areas rather than in producing areas. These markets are
generally well established and have developed a clientele of consumers who
purchase in the market. The disadvantage to using this type of market
compared to roadside stands is that the grower must pay the cost of trans-
portation. The advantage is that the grower does not need to worry about
advertising to entice customers to travel to his stand.
If an established city or local farmers' market does not exist in an
area a grower or group of growers would like to market produce, then the
growers) must pursue avenues for establishing a new market. County exten-
sion personnel are a good source to begin with for finding information
concerning existing markets and for determining the potential for estab-
lishing a new market. The interest for the market must come from growers
who want to use the market, however, and once a market is established,
management of the market should be the responsibility of those who use it,
not county extension personnel.
Regional and National Markets
Food service establishments, supermarkets, and other retail outlets
generally procure produce in regional and national markets. Growers wish-
ing to sell produce in these markets must establish a marketing process
that provides services supplied by participants depicted in Figure 1. As
stated earlier, growers generally use the services of produce dealers to
sell in these markets. The challenge for growers who grow vegetables in an
area where no commercial produce industry exists is to find an established
dealer who will market his produce, and if that cannot be accomplished,
then the challenge is to make conditions in the area conducive to bringing
in a produce dealer.
The following discussion describes ways for obtaining a reputable
produce dealer for marketing fresh produce. Other methods for marketing
produce in regional and national markets are then described for those who
cannot obtain the services of a produce dealer or for those interested in
improving their marketing process by adding additional marketing alterna-
Obtaining a Reputable Produce Dealer
There are many kinds of dealers who may facilitate the marketing pro-
cess in regional and national markets. Produce dealers consist of two
general classes: selling dealers and buying dealers. Selling dealers
assist growers in selling their produce, and dealers put into this class
are grower's agents, selling brokers, and commission merchants. Buying
dealers purchase produce from the grower or agent of the grower, and deal-
ers put into this class are buying brokers and shippers.
Grower's agents generally work directly with the grower in one or more
phases of the production-marketing process. It is common for a grower's
agent to handle the selling of a grower's produce in the agent's own name
and then pay the net proceeds to the grower. The division of responsibil-
ity between grower and agent depends on the agreement made between the two
parties. The grower's agent should act in the grower's best interests in
all areas of responsibility assumed for the grower.
A selling broker acts as an agent for the grower, negotiating valid
and binding contracts for the sale of a grower's produce. The selling
broker charges a fee to the grower for his services only if a sale is made.
A selling broker generally contacts buyers in the receiving market to pur-
chase the produce.
A commission merchant usually operates out of the receiving market.
The commission merchant does not take ownership of the produce, but accepts
it on consignment and thus is obligated to act in the best interests of the
grower and to obtain the best possible price for the produce.
A buying broker is an agent for a buyer. A buying broker usually
operates from the shipping point and negotiates valid and binding contracts
between growers and the buyer he represents. The grower or the grower's
agent is responsible for the grower's interests when negotiating with a
buying broker since the buying broker is obligated to act in the buyer's
A shipper is a buying dealer who purchases produce directly from the
grower for resale. A shipper generally operates from the shipping point
and assumes the risk for the produce once he purchases it. Again, the
grower or grower's agent is responsible for the grower's interests in nego-
tiating with the shipper.
Given the various kinds of produce dealers, finding a reputable dealer
who will assist the grower in the marketing process can be a difficult
task. Several sources of information exist for searching for the produce
dealer the grower needs. These sources include the State Department of
Agriculture Division of Marketing, trade magazines, and trade journals.-/
The State Department of Agriculture lists dealers who are licensed and
bonded according to regulations specified in Florida's A~i.B!icurai Bond
and License Law. The Agricultural Bond and License Law specifies that any
dealer who handles produce that is a) not grown by themselves, or b) not
paid for in cash at time of purchase with United States currency and is not
a bonded licensee under the Federal packers and stockyards act must be
licensed and bonded by the Commissioner of the State Department of Agricul-
ture. The State Department of Agriculture can provide a list of these
licensed and bonded dealers operating in Florida.
Trade magazines are an additional source of information for locating
dealers. Trade magazines generally contain advertisements of produce deal-
ers operating in various areas of the country. These dealers can be con-
tacted to determine their potential for marketing produce in a new area.
These dealers may or may not be from a nearby area. Any dealer that is
located by these means should be researched to determine their credit and
reputation in the trade as well as to make certain they are licensed and
bonded under federal or state laws.
An additional source of information for locating a produce dealer is
trade journals. Trade journals list dealers by location within the United
States and produce handled, and generally rate the reputation and credit of
the dealers. These journals are published by produce industry publishing
companies and are continuously updated to give current addresses, phone
numbers and ratings of dealers operating in the industry. The Red Book,
published by Vance Publishing Company in Shawnee Mission, Kansas, and the
Blue Book, published by Produce Reporter Company in Wheaton, Illinois are
two examples of trade journals that list and rate produce dealers.
Growers locating dealers by these or other means should make certain
that the dealers are licensed and bonded and should also check on their
reputation as dealers. Having no dealer could end up being better than
having a bad dealer. If possible, the grower should get in writing the
functions the dealer will perform at specified prices. Written documenta-
tion is important in case a problem later arises between the dealer and
State Farmers' Markets
Another method for marketing produce in regional and national markets
is State Farmers' Markets. There are 15 fruit and vegetable State Farmers'
Markets located in Florida, each serving, a specified region.!/ All State
Farmers' Markets operate on a seasonal basis that correspond to the produc-
tion period of the area served. These markets offer both small- and large-
scale growers an opportunity to sell their produce in the national or re-
gional markets by using the services of a produce dealer, generally a sell-
ing or buying broker. Many of the markets also offer other methods of
sale, such as auction and direct sale, but selling through produce dealers
is the most common method for selling in the national or regional markets.
A farmer wishing to market produce through State Farmers' Markets
should contact the market manager to find out which, if any, produce deal-
ers are operating on the market and to determine which commodities and
varieties of commodities are selling best on the market. The same evalu-
ation of the produce dealers operating on the farmers' market should be
done as for dealers identified from other sources. The managers of State
Farmers' Markets do try to get reputable dealers to operate in their mar-
kets, however, it is the responsibility of the growers to guarantee that
the dealers have the qualifications the growers desire. Again, it is de-
sirable for growers to get in writing the functions the dealer will perform
at specified prices. It is also important that all transactions be record-
ed in a business like manner so that they can be verified at a later date
As a final point, if a State Farmers' Market does not exist in the
nearby area and enough support can be obtained for promoting a new market,
then the group of growers supporting such a market should contact the State
Department of Agriculture3/ and their elected state representatives to
express their support. If enough support exists, the State can request a
feasibility study to determine the viability of a new market. If a need is
identified, then legislation can be introduced to implement such a market.
The desire for a new market must first, however, come from the growers in
Another marketing alternative for overcoming the problem of having
enough produce to justify a produce dealers' time to market the produce in
a new area is a cooperative organization.
Cooperatives are voluntarily owned businesses, controlled by their
users and operated for their mutual benefit on a nonprofit basis. The
basic purpose of a cooperative is to give groups of people an opportunity
to serve their own needs and solve their own problems more effectively than
when acting individually. By acting as a group in a cooperative, growers
can increase the number of alternatives for acquiring a produce dealer.
First, a cooperative can get commitment from its members to grow a minimum
volume of produce for marketing through the cooperative. The cooperative
can then use this committed volume to obtain better produce dealers. The
larger the volume of produce available, the larger will be the number of
produce dealers who will be interested in serving the cooperative. This
will give the cooperative the ability to choose more reputable dealers.
A cooperative can also be important for obtaining necessary investment
capital from growers who will use the cooperative. This investment capital
may be necessary for building facilities to perform the required services
for marketing in regional and national markets. Cooperatives can also be
important for gaining bargaining power for growers through increased infor-
mation collection and dissemination and increased specialization of manage-
The development of a new cooperative is much like the development of a
new State Farmers' Market. The interest in developing a cooperative must
first come from growers wishing to expand their market opportunities. The
county extension agent is a good source of information for developing a
cooperative once a group of growers identify an interest.
Grower Vertical Integration
Vertical integration is defined as ownership-participation by a single
organization in two or more steps in the total production-marketing pro-
cess. Vertical integration can be either forward (toward the retailer) or
backward (toward the grower). From a grower viewpoint, vertical integra-
tion means financial participation in facilities and operations of two or
more stages of the production-marketing process.
Vertical integration through ownership can be achieved by an indi-
vidual or by members of a group. Individually owned, vertically integrated
businesses are generally developed by the owner adding step by step to his
own operation. Integrated grower-shippers are examples of individual ver-
tical integration that are commonly found in Florida. Growers extend own-
ership and control of their crop through harvesting, sorting, sizing, pack-
aging, and shipping by investing in operations which allow direct sales in
the national and regional markets.
Integrated grower-shippers are indicated at the bottom of Figure 1.
An individual grower can vertically integrate on his own or with a group of
growers. The grower can alternatively encourage another growers) to ver-
tically integrate in the area so that he and other growers may be able to
market produce through the grower-shipper, as indicated in Figure 1.
Computerized Marketing Systems
Computerized marketing is a new marketing alternative that has been
developed and implemented in the produce industry. Computerized marketing
involves the use of a microcomputer to list produce that growers have for
sale and produce that buyers need to purchase in a mainframe computing
system available throughout the United States. Buyers and sellers through-
out the United States have access to the information, giving easier access
to markets that otherwise could not be used by traders.
Computers are being used extensively by firms marketing produce.
Computer Aided Marketing Programs Produce Marketing System-4 has extended
the use of the computer into the marketing function of the business. This
computer aided marketing system also provides information and marketing
management services to assist in providing auxiliary information (weather
and market information) used in marketing produce and to assist in monitor-
ing and managing the marketing operation for individual firms.
The question of whether vegetables can be grown is far different from
the question of whether vegetables can be grown and marketed with reason-
able expectation of profit. The question of marketing has been addressed
in this bulletin to encourage growers to think about where the produce they
grow will be marketed. This question must be answered before any seed or
transplant is put into the ground. This should, in fact, be one of the
very first questions answered when considering the production and marketing
A key element has been omitted in this analysis. Finding markets for
produce being grown has been the emphasis of this bulletin, but a growers)
should also address the question of expected profit if a marketing alter-
native is chosen. Questions the grower should be able to answer include:
(a) what will it cost to grow and market the produce; (b) what is a reason-
able price to expect for the produce; (c) what risk is associated with
growing and marketing the produce, and; (d) what are the expected profits?
None of these are easy questions to answer, but they must be addressed.
The grower needs to know how much it will cost to grow the produce, what
the expected profits are, and how much risk is associated with growing the
produce. Even if the produce can be marketed with a positive expected
profit, the risk may be too high for the grower to assume. An example
might be tomatoes with an expected profit of 1,000 dollars per acre, but
with a range of expected profits from a minus 4,000 dollars per acre (an
expected loss) to a positive 4,000 dollars per acre. A grower that cannot
survive a loss of 4,000 dollars per acre may choose not to grow tomatoes,
or at least choose to.limit his production.
Growing vegetables is easy for many growers. Growing vegetables pro-
fitably, knowing which market to serve is not easy for growers. Growers
must answer the marketing questions before planting their first seed or
transplant. After all, planting the seed or transplant may be easy, but
harvesting and marketing the fruit of the seed can also be impossible.
1/ Addresses for these sources are:
Director, Division of Marketing
Florida Department of Agriculture
Room 435 Mayo Building
Tallahassee, Florida 32304
The Produce News
2185 Lemoine Ave.
Fort Lee, New Jersey 07024
The Packer Magazine
7950 College Blvd.
P.O. Box 2939
Shawnee Mission, Kansas 66201
Produce Reporter Company
315 West Wesley Street
Wheaton, Illinois 60187
Vance Publishing Company
7950 College Blvd.
P.O. Box 2939
Shawnee Mission, Kansas 66201
2/ The locations of these farmers' markets are: Bonifay, Starke, Brooker,
Florida City, Fort Myers, Fort Pierce, Quincy, Immokalee, Pahokee,
Palatka, Plant City, Pompano Beach, Sanford, Trenton and Wauchula. For
information about these markets contact either the market manager on
the market or the Chief, Bureau of State Markets, Division of Market-
ing, Florida Department of Agriculture, P.O. Box 1191, Winter Haven,
3/ Contact the Director of Marketing, Florida Department of Agriculture,
Room 435 Mayo Building, Tallahassee, Florida 32304.
4/ For further information contact Computer Aided Marketing Programs,
Inc., P.O. Box 1024, Gainesville, Florida 32602.
VanSickle, John J. Marketing Alternatives for Florida's Commercial
Vegetable Growers. Florida Coop. Ext. Serv. Cir. 541. 1982.
VanSickle, John J., John L. Adrian, and James Epperson. "Computerized
Marketing for Fresh Produce A Development for Today." Journal of
Food Distribution Research 16: Forthcoming.
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