Amid concerns about food safety and supermarket buying power, more and more consumers are choosing to buy their produce from other sources. Farmers’ markets, wholesale markets and community supported agriculture programmes are all proving successful, along with a new retail format – the fresh-food supermarket. David Robertson reports.
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A combination of food safety concerns and supermarket buying power is encouraging more consumers and farmers to find ways to cut out the middlemen and trade directly with each other. In countries like the UK and Germany, farmers’ markets have sprung up to provide middle-class consumers with everything from premium cheeses to organic geese at Christmas.
In the US, however, the growth of direct-farm sales has been even more rapid and an estimated 10 to 13% of consumers regularly buy from farm sources. This is happening through a number of retail outlets: farmers’ markets, wholesale markets, fresh-food supermarkets, community supported agriculture programmes and online farmers’ markets.
Of these, farmers’ markets are perhaps the most widely recognised and the number of these markets has more than doubled in the last ten years: from 1,755 in 1994 to 3,706 last year, according to the US Department of Agriculture. Farmers’ markets now account for about $1bn in food sales, which is still tiny compared with the $661bn worth of agricultural products sold in the US every year, but an important lifeline for many farmers.
Small farmers in particular benefit from being able to sell direct to consumers because they can claim higher prices than if they sold to a supermarket. A bunch of spinach, for example, would fetch less than $1 from a supermarket but might retail for $1.50 at a farmers’ market.
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By GlobalDataThis ability to get better prices has been linked to a slowdown in the number of small farm bankruptcies (which was running at 400 a week at points during the 1980s). Indeed, the number of small, 10 to 49 acre farms has actually grown by about 30,000 to 563,772 in the last seven years.
A new retailing category
For consumers on the other hand, the attraction of a farmers’ market is that they can buy fresh food that may have been picked just a day before – a supermarket tomato, for example, is typically 18 days old by the time it reaches the checkout. Consumers also seem to like meeting farmers face-to-face as many have lost faith in the food industry after a series of health scares.
Charles Touchette, director of the North American Farmers’ Direct Marketing Association, said: “What we are seeing is the combination of both farmers and consumers wanting this arrangement. Farmers are able to keep more of the dollars invested in their crops and consumers get fresh food they can trust. It is still a small percentage of overall food sales but it is big enough to matter.”
However, the most significant trend in this part of the food-retailing industry has been the rapid growth of fresh-food supermarkets. Fresh food stores exist all over the world but they tend to be small and boutique. In the US, however, the enormous size of the stores and the vast product ranges they carry mark them out as a completely new retailing category.
Something different
These stores look like regular supermarkets in every way except for the type of products sold – the emphasis here is on fresh food, often organic, and rarely processed. Some stores are so basic that they are little more than a farmers’ market with walls attached.
These fresh-food supermarkets have become the fastest growing segment of the US food-retailing industry and many companies are delivering double-digit growth at a time when other food retailers are struggling with flat or declining sales.
Colorado-based Wild Oats, for example, increased sales by 8% last year and is forecasting 8-10% growth in 2005. The company believes consumers are looking for something different to the traditional supermarket and this is fuelling its growth. About 65% of Wild Oats’ products are perishable and the rest of its items are things like organic cereals, wines etc. Wild Oats also has a very popular holistic health centre that sells everything from aromatherapy oils to natural toothpastes.
The company currently has 78 stores across the US and is adding 10-15 stores a year. Its success, and that of similar companies, has attracted attention from the major supermarkets that are trying to move themselves into this market. Safeway, for example, has just announced a new marketing plan that promotes its products as “food for life”.
Keeping costs down
Sonja Tuitele, a spokeswoman for Wild Oats, is unconvinced that such moves by the traditional supermarkets will succeed. “As the conventional retailers struggle with Wal-Mart coming in at one end of the market they are looking to the other end for growth. The supermarkets say they are committed to fresh and organic foods but I think that is only skin deep. We believe consumers will wait to see if the talk of improved service and customer care is real.”
The new fresh-food supermarkets have also tried to make themselves different to existing retailers by making the grocery shopping experience more pleasant. They often use natural materials, like wooden signs and terracotta pots, as well as bright colours to give the stores a warmer feel than the sterile aisles of a traditional supermarket.
Wild Oats has also opted to put more employees on the shop floor so consumers can ask questions, get recipe advice and find out more about where the produce came from. (This is a tactic that traditional supermarkets are picking up on although their efforts are likely to constrained by the need to keep costs down.)
The fresh-food supermarkets also go to great lengths to source produce from local suppliers and up to 70% of products can be local during the harvesting season. In southern California, where much of the US’s produce is grown, local content can reach 85%.
A premium price
As a result, growers see these stores as a useful addition to farmers’ markets. Charles Touchette says: “We don’t see these fresh-food supermarkets as competition to farmers’ markets; rather, they are complimentary. They have the ability to raise awareness that this sort of food is available and as a result they will increase the visibility of direct-farm sales, which is good for everyone.”
However, fresh-food supermarkets and farmers’ markets are not the only direct sales avenues to be growing. Community Supported Agriculture (CSA) programmes have been around for many years but the internet is now allowing them to develop more sophisticated arrangements. A CSA gives consumers a share in a farm’s produce and every week or month they will get a delivery of goods, usually a box containing a mix of vegetables picked that week, as a dividend. Anecdotal evidence suggest that CSAs are becoming increasingly popular, as are virtual farmers’ markets.
These online farmers’ markets remain a small part of the industry but Touchette says: “We’re seeing virtual farmers’ markets giving consumers the chance to ferret out produce that they normally wouldn’t be able to get. But, at the moment, many like the human contact involved in more traditional farmers’ markets and we expect that to continue.”
While farmers’ markets and CSA programmes continue to attract a certain type of consumer it is the rapid growth of the fresh-food supermarkets that has really attracted the industry’s attention. Many traditional supermarkets are trying to copy some of the techniques used by these retailers but large companies rarely manage to imitate such customer-oriented strategies. It is more likely that the fresh-food supermarkets will see their growth halted not by competition from traditional food retailers but by running out of consumers willing to pay a premium for their food.
