Marketing AltemativeS. ,"
for Florida's Commercial Vegetable-G
Dr. John JWide K
SFlorida Cooperative Extension Service / Institute of Food and Agricultural Sciences / University of Florida / John T. Woeste, Dean
TABLE OF CONTENTS
CURRENT MARKETING SITUATION.................. .. ................ 1
Selling Dealers............................................ 1
Buying Dealers.............................................. 2
EXPECTATIONS OF MARKET PARTICIPANTS............................. 3
Marketing Firms............................................ 4
MARKETING ALTERNATIVES .......................................... 6
Local Markets............................................. 6
Regional and National Markets.............................. 7
MARKETING ALTERNATIVES FOR ACCESSING REGIONAL
AND NATIONAL MARKETS .......................................... 7
Vertical Integration........................................ 8
Electronic Marketings....................................... 9
FOR FLORIDA'S FRESH VEGETABLE GROWERS
John J. VanSickle*
Most growers are aware that the fresh produce industry is highly compet-
itive, and that growers from the United States and foreign countries must
compete with one another for an available market. A major feature contri-
buting to industry competitiveness is the perishable nature of fresh
produce. The product must be moved quickly from field to consumer to insure
the best quality.
This circular briefly analyzes the current marketing situation and ident-
ifies alternative systems that growers could use in marketing their fresh
produce. Growers must continually research ways to improve their production
and marketing skills in order to compete effectively for their share of the
market. Studying and implementing alternative marketing systems allows the
grower to maintain or improve a competitive edge in the marketplace. The
grower who wants the best prices should take responsibility for learning about
the various marketing options and how they work.
CURRENT MARKETING SITUATION
Florida's commercial vegetable industry is diverse and complex. Fresh
produce must be moved through the marketing channel quickly once the produce
reaches a mature state Because of time constraints and market complexity,
producers generally work with produce dealers to sell their produce. Some
producers are large enough to employ a staff of full-time produce dealers to
market their vegetables. Small producers, however, often cannot attract
produce dealers because they do not produce enough volume on their own or
jointly with other producers to economically justify the dealer's commitment
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 dealers put into this class are buying brokers and
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 responsibility between
grower and agent depends on the agreement made between the two parties prior
*John J. VanSickle is an Assistant Professor and Marketing Economist in
Food and Resource Economics, IFAS, University of Florida, Gainesville 32611
to the season. 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 purchase
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 best
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 negotiating with
If a grower uses a selling dealer, he is entrusting the dealer to act in
his best interests in selling his produce. If a grower is dealing directly
with a buying dealer, then the grower is responsible for protecting his own
interests. A grower should employ the services of a selling dealer only if
the cost of the dealer's services will at least be offset by the improved
prices the dealer could derive from the produce. However, a grower can do as
well on his own by working with buying dealers directly if he possesses ade-
quate time and marketing skills. In any case, the grower should be sure that
his best interests are well protected, either by the selling dealer or by the
knowledgeable grower himself.
A grower may encounter various problems with any of these relationships
between growers and produce dealers. For instance, a grower may be forced to
work directly with buyers because no selling dealers are located in the area
at harvest time. In this case, the grower must have sufficient marketing
skills to avoid being taken advantage of in the marketplace.
Also, the fresh produce industry is comprised of many growers and compar-
atively few commercial buyers. Shipping point produce dealers locate where
the produce is currently being harvested and move on to other areas when the
harvesting moves. Commercial buyers often establish relationships with
produce dealers so that they can obtain a steady supply of consistent, quality
produce. For this reason, growers may choose to work with a dealer who has
established such a relationship with buyers. The transient nature of the
fresh produce industry, combined with the fact that dealers compete with one
another for the available buyers, often cause the dealers to establish closer
working relationships with buyers than with the growers. Consequently, the
grower should be aware that, while a selling dealer is supposed to act in the
grower's best interests, the dealer also has a vital interest in keeping the
buyer happy, and can lose sight of the grower's best interests.
These relationships between selling dealers, buying dealers, and growers
cause distress among growers. Growers often feel that the marketing system
takes advantage of them, and these growers develop a distrust for the
system. Because of this distrust, growers continue to look for ways to
improve their marketing skills. Before discussing specific marketing alter-
natives growers can use, the concerns and expectations of the different
participants in the marketing process are presented.
EXPECTATIONS OF MARKET PARTICIPANTS
While growers naturally have a vital interest in looking out for their
own welfare, the grower must be aware of the concerns of other market partic-
ipants when considering alternative marketing arrangements; specifically, the
interests of consumers and agribusiness firms that participate in the
marketing process. To be successful, the marketing process must satisfy as
many of the concerns of each of the market participants as possible.
Growers naturally want the best possible price for their produce. But
they also want a marketing system that is fair to them and their fellow
growers, such that all growers in comparable situations are treated equally.
Regardless of the specific type of marketing system, a grower in the fresh
produce industry will generally desire a system that has the following charac-
1. Equitable treatment from buyers--Growers want the system of pricing
and market access to be based on the market performance of the
product rather than on the personal attitudes of the buyer toward
2. Reasonable prices that consider production costs--This is a contro-
versial point among growers and other market participants.
Guaranteeing the cost of production to growers can result in
consistent overproduction, with growers receiving the cost of pro-
duction. Growers generally agree, however, on the importance of
realizing reasonably predictable prices at the time production
decisions are made.
3. Quality price differentials--If the consumer pays more for a higher
quality product, then the grower wants the price he receives to
reflect this difference. On the other hand, if consumers pay the
same price for different qualities of product, then the grower will
generally not want the quality differentials to affect his price.
4. Adequate reward for grower's contribution--Since growers outnumber
buyers, growers must compete for the buyer's services, making it a
"buyer's. market." For this reason, growers often feel that their
contribution to the marketing process is not adequately rewarded.
Growers feel that marketing firms should be required to compete more
heavily for their product so that these firms are not compensated for
more than their contribution to the product justifies.
Additional specific characteristics considered important by the grower in
the marketing process include:
5. Easy access to convenient market outlets;
6. A viable choice among competing buyers--Total dependence on a few
buyers is not desirable;
7. The ability to move to market and/or sell any amount the grower
chooses at any time;
8. Sufficient, timely, and adequate market information to obtain the
best available offer at any given time--This information could be
either public or private, such as state agency market news services
or market news generated by organized marketing groups;
9. Sufficient confidence in the marketing processes and institutions to
feel that it is not working against him.
Of course, various other desires are often expressed. Growers can strive for
a better marketing system that is politically and economically feasible, but
they should be aware of the influence of other market participants and should
not have unrealistic expectations.
Expectations of agribusiness firms usually vary according to the
company's size and complexity. Small firms may share many of the basic
concerns expressed by growers about competitive freedom and equality of treat-
ment. However, large firms operated by professional management may have
expectations that exert strong influences on the types of marketing arrange-
ments open to growers. Although agribusiness firms are much like growers in
that they are looking out for their own best interests, their objectives may
not always agree with those of the grower. For example, company growth may be
of great concern in many firms since a growing firm will attract better cal-
iber management who can serve the firm's interests more effectively, and may
reward managers more.
Regardless of size, every agribusiness firm has some similar concerns,
1. Security--Security is given a very high premium in most firms.
Managers generally do not like risk and will avoid high-risk oppor-
tunities in favor of more stable sales and income streams. Managers
generally believe they can maximize the security of the firm and
increase their market options by increasing their control of the
market channel. Development of strong brands with good consumer
acceptance is an excellent tool for increasing power and security in
a market channel. Another tool some firms use is vertical inte-
gration, which involves controlling more steps in the production-
marketing process through ownership.
2. Timely and accurate information--Timely and accurate information on
supply and demand conditions is a highly regarded concern in most
firms. Several sources of information, both public and private, are
available to most 'firms. Information generated privately by the firm
itself or by marketing consultants is usually superior to information
which is available publicly. Information gained through any infor-
mation channel usually is highly guarded and is considered a private
The amount of product supplied to a firm constitutes the level of service
provided by most agribusiness firms. Fixed facilities are often very
important to fresh vegetable marketing firms. Counter to the interests of
growers, where smaller crops may lead to higher returns to growers, a big crop
will almost always be more profitable to agribusiness firms than a small crop;
hence, the interests of growers and agribusiness firms could conflict.
Consumers are the ultimate source in determining the demand for a certain
product. Although consumers are the ultimate demand factor, their concerns
are not as complicated as those of other market participants. The most impor-
tant desire consumers express is an adequate supply of food at a reasonable
price. Adequate supplies refer to more than just sufficient quantities of
foods for the prevention of hunger. Consumers are also concerned about fluct-
uations in supplies and prices of individual foods. The impact of a
fluctuation in supply and/or price of an individual food item depends on the
importance of the item in the consumer's diet and budget. Sharply higher
prices for beef or milk could cause considerable dissatisfaction with
consumers. On the other hand, sharply higher prices for carrots or radishes
would create considerably less concern because of their minor impact on food
Other consumer concerns include: (1) Variety--Consumers want variety and
welcome the opportunity to try new items, but they expect value commeasurate
with cost; and (2) Convenience--As incomes of consumers have risen, so has the
desire for convenience items, such as frozen and canned foods. Again,
however, consumers expect value commeasurate with cost.
The major implication of the various market participants' expectations is
that they are bound to conflict. An example of a conflict would be that
growers and agribusiness firms both favor a lot of competition--for the other
side of the market rather than for their own side. Therefore, a grower con-
sidering alternative marketing practices should be aware of the following:
1. Any proposed alternative must first sufficiently meet grower's con-
cerns so as to receive their support;
2. Any proposed alternative must receive the support of or be able to
withstand the political and economic power of agribusiness; and
3. The alternative must meet the basic desires of consumers, or they
could consolidate to defeat the proposed alternative.
The type of marketing alternative considered will determine the relative
importance of these three points. The task is to select marketing
alternatives that present real opportunities to growers, while satisfying the
interests of marketing firms and meeting consumer demands.
Feasible marketing alternatives for growers depend, in part, on the
volume of produce to be marketed. In general, the larger the producing
operation, the larger the available market. Small-scale growers generally
operate most effectively by selling in regional or local markets. However,
some small-scale growers have marketed their products in national and regional
markets using produce dealers located at regional markets such as the State
Farmers' Markets. While large-scale growers can and do use these same mar-
keting options, the bulk of their produce is marketed in national and regional
markets through their own produce dealers. The different local and regional
markets that growers can use will be examined here, along with some marketing
alternatives that both small- and large-scale producers can use to more effec-
tively market in the national and regional markets.
Local retail outlets--Local outlets available to growers often are
family-owned and operated businesses. The chain-store type of local retail
outlet usually has a central purchasing department responsible for supplying
many stores, and therefore does not make a policy of purchasing produce
The owner-operators of family-owned businesses usually purchase the
produce 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 quality
produce. The advantage to the grower in selling directly to the outlet is
that the produce dealer's fee is eliminated. 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.
U-Pick--A second method for selling in the local markets is by establish-
ment of 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
unprofitable 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 supervision
Roadside stand--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. This local marketing alternative has been used by both
small- and large-scale producers.
A recent IFAS study by Stegelin and Wall identified characteristics which
contributed to the success of a roadside stand. Among them were: (1) close-
ness to a large urban population center; (2) a long selling season; (3) near-
ness to a high percentage of year-round residents; (4) a large acreage avail-
able for vegetable production, and; (5) grower income sources other than
vegetables. Another important factor was developing repeat customers through
goodwill in the operation.
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 transportation. The advantage is that the
grower does not need to worry about advertising to entice customers to travel
to his stand. This option has been used mostly by small-scale producers.
Regional and National Markets
State Farmers' Market--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 corresponds to the
production period of the area served. These markets offer both small- and
large-scale growers an opportunity to sell their produce in the national or
regional markets by using the services of a produce dealer, generally a
selling 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.
Direct selling--This method involves the use of a produce dealer, and is
the method most commonly used by large-scale producers. The advantages and
disadvantages of this method, discussed previously, include the fact that it
generally requires a large volume of produce to interest the produce dealer.
As stated previously, small-scale producers often cannot attract produce
dealers to direct-sell their produce in regional and national markets because
their volume of production is too small. If they do attract a dealer, he does
not always work as hard for the small producer as he does for the larger
producer, because the produce dealer's income is normally based on volume.
MARKETING ALTERNATIVES FOR ACCESSING REGIONAL AND NATIONAL MARKETS
Three marketing alternatives are discussed here which will assist growers
in accessing the larger regional and national markets: (1) Vertical
integration--This alternative allows the grower to gain more control of the
production-marketing channel; (2) Cooperatives--Growers use cooperatives to
consolidate their volume of produce and gain access to larger markets; and (3)
Electronic marketing systems--These systems allow widespread communication of
market information and greater possibility of consolidating produce for ship-
Vertical integration is defined as ownership-participation by a single
organization in two or more steps in the total production-marketing process.
Vertical integration can be either forward (toward the retailer) or backward
(toward the grower). From a grower viewpoint, vertical integration 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 individual
or by members of a group. Individually owned, vertically integrated
businesses are generally developed not by purchase, but by the owner adding
step by step to his own operation. Vegetable grower-shippers are an example
of individual vertical integration that is commonly found in Florida.
Vegetable growers extend ownership and control of their crop through
harvesting, sorting, sizing, packaging, and shipping by investing in
operations which allow direct sales in the national and regional markets.
Vertical integration opportunities are greater for groups than for indi-
viduals. The steps in the integration process can be purchased or developed,
and the group-integrated organization can be in the form of partnerships, a
regular corporation, or a cooperative corporation.
Cooperative corporations--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 effec-
tively than when acting individually.
Cooperative corporations have four major characteristics or principles of
operation that distinguish them from noncooperative corporations:
1. Democratic member-user control--The main theme underlying this princ-
iple is that member-users are in control of setting policies. The
amount of control each member-user has can vary. Many cooperatives
adhere to the one member-one vote policy. Some cooperatives allow
voting in proportion to the amount of use (patronage) of each member,
with an upper limit on the number of votes any one member may have.
2. Service at cost--A key feature of the cooperative business enterprise
is that cooperatives operate to increase the net income of their
member-users by providing marketing services at cost. Noncooperative
corporations, on the other hand, seek to realize profits from the
services they provide for the benefit of their investors. Any net
savings generated by the cooperative are distributed to the member-
users as a patronage refund in proportion to the amount of net
savings generated by each member. Because it is difficult to measure
the exact net savings generated by each member, patronage refunds are
generally distributed to the member-users on the basis of patronage.
3. Limited returns on money invested--This principle complements the
service-at-cost principle. Cooperators recognize that capital is
vital to the operation of their business; however, in a cooperative
venture, capital is a means to an end, not an end in itself. The
cooperative seeks to provide services at reasonable prices for the
member-users, not to generate income from invested capital.
4. Member-owned and financed--This principle promotes the idea that
cooperatives should be owned and financed by the member-users, not by
investors. Members should finance their cooperative since financial
investment gives the members incentive to keep the cooperative a
viable force in agribusiness. Financial investment guarantees that
the cooperative will be a member-owned organization and that the
members will be more likely to support the cooperative through their
Cooperatives can be used by small- or large-scale growers, or a combi-
nation of both, to enhance the grower's access to local, regional, and
national markets. Cooperatives can also be used to gain bargaining power for
the growers through increased information collection and dissemination and
increased specialization of management.
Electronic markets provide a mechanism for centralizing the price
negotiation process for agricultural commodities, without the physical
assembly of buyers, sellers, and products at one location. As such, prices
determined in electronic markets can more accurately reflect overall market-
wide conditions. In addition, access to local, regional, and national markets
can be enhanced, market information can be more accurate and readily
available, and total marketing costs may be reduced with electronic markets.
Electronic markets separate two distinct, but often combined, marketing
functions; negotiating the trade and the physical transfer of the product from
seller to buyer. Electronic marketing centralizes the negotiation through the
use of modern electronic technology and decentralizes the physical transfer by
eliminating the assembling of buyers, sellers, and products at a single
Electronic markets can take many different forms; however, they all
follow the same general model. Sellers describe their produce in accordance
with standard grades or industry nomenclature. Grading must be done at the
farm or at a local assembly point. Similar products can be commingled into
truckload or carload lots prior to being offered for sale, or the commingling
can be done "on paper".
Offers to sell are disseminated to potential buyers at remote locations
through two-way electronic communications. Buyers bid against each other in
the electronic medium until acceptable terms are reached between a buyer and
Methods for negotiating sales range from relatively simple to complex:
1. Manual trading systems--Market personnel match telephoned bids and
offers. This function is typically performed by produce dealers.
2. Telephone auctions--Offers to sell are auctioned via a conference
telephone connection to potential buyers.
3. Teletype auctions--Sellers' consignments are listed on a teletype
network of potential buyers, then offered at a steadily declining
price until a buyer activates a "buy" key on his teletype.
4. Computerized trading systems--Traders communicate directly with a
computer via a telephone and/or teletype. The computer accepts,
compiles, and stores bids and offers, and completes transactions by
matching bids and offers.
The choice for type of electronic market depends on the number of
traders, volume traded, geographical market coverage, frequency of sales, and
amount of resources available for development.
To be successful with electronic marketing, certain commodity or industry
characteristics are important, including:
1. Potentially competitive markets--Electronic marketing could be
especially helpful to sellers where an imbalance of market power
exists between buyers and sellers, providing the powerful side
accepts the system. However, the potential for a competitive system
with several buyers and sellers must exist.
2. Trader interest--Traders must perceive a need for the system and be
willing to trade under the rules of the system. Reduced personal
contact may make this characteristic difficult to maintain.
3. Commodity description--Characteristics must be identified for each
commodity traded so that buyers know exactly what they are getting.
4. High volume--Volume is necessary in the electronic market to make it
a base for competitive trading.
Other characteristics such as performance guarantees and grading systems
are important to make the marketing system operational.
The fresh produce industry is highly competitive. Several marketing
alternatives have been discussed which can be used by individuals or groups
that grow and/or market fresh produce. These alternatives could be used to
enhance the efficiency of the present system or to change the system where
growers perceive problems. The alternatives are not mutually exclusive, but
can be used in combination. These alternatives are readily available and can
be implemented with proper planning. Growers should review and consider these
alternatives if they want to maintain or improve their competitive edge.
Black, William E. and James E. Haskell. Verticle Integration Through
Ownership. Marketing Alternatives for Agriculture. National Public
Policy Committee Publication No. 7(7-7). Nov. 1976.
Hedland, Floyd T. and Michael D. Price. Plain Talk About PACA. USDA, AMS,
FVD. Program Aid 1096. July, 1974.
Henderson, Dennis R., Lee F. Schrader and Michael S. Turner.
Commodity Markets. Marketing Alternatives for Agriculture.
Public Policy Committee Publication No. 7(7-2). Nov. 1976.
Kirkman, C. H., Jr. Understanding Your Cooperative. USDA, ESCS. Cooperative
Information Report 6. July, 1979.
Rhodes, V. James and Olan D. Forker.
Alternatives for Agriculture.
Publication No. 7(7-1). Nov. 1976.
The Situation Now. Marketing
National Public Policy Committee
Stegelin, Forrest and George Bryan Wall. Management of Roadside Markets.
Florida Cooperative Extension Service FRE-34. January 1981.
Wall, G. Bryan. Marketing Alternatives For Small Scale Commercial Vegetable
Growers. Fact Sheet FRE-14. Feb. 1981.
This public document was promulgated at a cost of $389.39, or 26 cents per copy, to provide information on market-
ing alternatives for vegetable growers who are contemplating which markets to use in selling their crops. 11-1.5M-82
COOPERATIVE EXTENSION SERVICE, UNIVERSITY OF FLORIDA, INSTITUTE OF FOOD AND AGRICULTURAL
SCIENCES, K. R. Tefertiller, director, In cooperation with the United States Department of Agriculture, publishes this Infor-
mation to further the purpose of the May 8 and June 30, 1914 Acts of Congress; and is authorized to provide research, educa-
tional Information and other services only to individuals and Institutions that function without regard to race, color, sex or
national origin. Single copies of Extension publications (excluding 4-H and Youth publications) are available free to Florida
residents from County Extension Offices. Information on bulk rates or copies for out-of-state purchasers is available from
C. M. HInton, Publications Distribution Center, IFAS Building 664, University of Florida, Gainesvllle, Florida 32611. Before publicizing this
publication, editors should contact this address to determine availability.