Like many commodity industries, Agriculture is changing at a rapid pace. The model of grain farmers selling their harvest to grain elevators (line companies) and cattle operators bringing their cows to town for the local auction is still a reality. There has been much consolidation in these wholesale marketing operations since the dissolution of the Canadian Wheat Board and likely more to come.
A small, yet growing proportion of primary producers are choosing to sell direct to consumer. Approximately 12.5% of producers choose this route across Canada, less in Alberta and Saskatchewan. The lure of higher margins was the original focus, but increasingly we are seeing direct to consumer marketing become part of a farm succession plan. A way to build an additional revenue stream for the next generation.
So what is direct to consumer marketing and is it worth considering?
There are 4 mains ways of selling direct to the consumer;
- Farm gate sales where customers literally stop and purchase at the producer’s location.
- Farmers’ markets have become increasingly popular in recent years and many are now year round.
- Community Supported Agriculture (CSA) where consumers purchase a share of the crop, which is collected or delivered to them.
- Crowd funding farm investments give a way for stakeholders to share the future crop.
Each of these has a different level of financial commitment and a different relationship involvement. Taking the step from talking to one of two representatives at the elevator to dealing directly with hundreds of customers is not for everyone. Producers have to be prepared to develop extra skill sets, or hire these in. From developing shopping channels, whether it be a farm shop or stall, or an online delivery service to consumers and restaurants, to branding the products, the extra financial rewards have to be balanced with the time, energy and costs to go direct to consumers. One also needs to be very honest with oneself, are you good with people? Direct to consumer means direct feedback, this can be a rewarding and a frustrating experience.
Consumers value a direct connection with producers, as they increasingly want to know where their produce comes from. As farms increase in size, to benefit from economies of scale, consumer perception changes. This is often due to misinformation, but there is a perception that large scale farming is corporate farming and there is a perceived lack of trust. This gives an opportunity for education, what if you can do both? Benefit from the scale and supply chain, whilst educating the consumer directly? There are several highly successful cooperatives who have chosen to come together to share the costs of marketing and share resources for packaging and distribution. This cooperative movement is growing in strength and number across the country.
For some producers, the choice to sell a portion of their product directly gives a chance for feedback, ideas for product innovation and keeping up to date with food trends. It allows producers to understand the consumers’ needs, and best meet them.
At DPA we are interested in Canadian rural prosperity, in growing and sustaining rural jobs and communities. We certainly expect to see a growing number of direct to consumer brands in the Agriculture industry in the next decade. There are already great examples of success from Camelina oil to honey to hemp. Direct to consumer marketing certainly isn’t for everyone but as we look for ways to diversify rural economies, this is an exciting place to start.
