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COVID-19 expanded the direct-sales market

TAGS: Beef
Tim Hearden WFP-hearden-direct-sales-040321.jpg
Audrey Pascone of Red Gate Ranch in Red Bluff, Calif., displays pork sausages for sale at a Redding, Calif., farmers’ market. The coronavirus pandemic expanded direct purchases of food from farmers and ranchers.
To keep their new local food customers, producers should consider online ordering and convenience.

The COVID-19 pandemic disruption of the food system resulted in more consumers purchasing their food directly from farmers and ranchers. The new customers create opportunities for producers to begin direct marketing and scale up their production. Due to public health concerns, online ordering and delivery – if not already offered by the producer – were added to direct marketing models.

In 2020, many producers saw a 30% to 50% increase in their direct food sales over 2019. Farmers that offer pick-your-own experiences recorded a 20% increase in customer activity. Dawn Thilmany, a Colorado State University ag economics professor and co-director of the Regional Economics Development Institute, says the main challenge is the increased unpredictability of the direct market.

“There’s so many people new to purchasing local food,” she says, “producers don’t know how many will stick around. When things return to normal, will the new customers still buy large amounts of beef directly from producers instead of at the grocery store? We don’t know the answer to that yet.”

A continued challenge for meat producers is processing capacity. For years it’s been difficult for small producers to gain access to processing for their animals, especially if they didn’t schedule 12 to 18 months ahead or don’t have a nearby small to mid-sized slaughterhouse.

Online shopping escalated

Before the pandemic, the online food retail market was forecasted to grow by 2 percent a year among mostly younger households. Coronavirus escalated the adoption of online food shopping across all age ranges. According to the U.S. Census Bureau, 2020 restaurant and bar sales dropped from $65 billion to $30 billion from February to April. Sales recovered to $55 billion by the end of the year.

“Restaurants that provided take-out previous to the pandemic were well situated to move online,” Thilmany said. “Most large food retailers also had a process in place for online ordering and were able to quickly scale it up to meet demand. In contrast, for a lot of producers involved in direct-to-consumer sales, if they didn’t already offer online ordering, the pandemic forced them to reconsider online as a marketing strategy.”

In 2020, many producers saw a 30% to 50% increase in their direct food sales over 2019. Farmers that offer pick-your-own experiences recorded a 20% increase in customer activity.

 “The pandemic normalized online sales for consumers, which helps producers who want to move larger volumes of their product than can generally be sold through farmers’ markets,” Thilmany said. “Initially producers who weren’t online saw new incentives to provide Ecommerce sales. And, if they maintain online sales after the pandemic, it provides a broader market.”

Thilmany works with the Economics Impacts of Local Food and Regional Food Systems group (www.localfoodeconomics.com). Its part of the USDA Agricultural Marketing Service’s COVID-19 Local Food Resource Hub, which provides information and live webinars on marketing models, public health guidelines, consumer food behavior insights, customer retention and engagement, cooperative business models, and state food policies.

Direct marketing models

Online sales support multiple marketing models. Farmers’ markets remain a great way to build relationships with customers and gain brand recognition. “There will always be customers that love to go walk around a farmers’ market and meet the producers,” Thilmany said. “That’s how I met the person from whom I buy my meat. Now I bulk order online from him to stock my freezer.

For producers distant from urban farmers’ markets, and their large customer bases, online ordering and shipping products may be an option outside of farmer’s markets. “You really have to review the shipping cost and perishability aspect of your product,” Thilmany cautioned, “because the shippers and [US] Postal Service have barely kept up with demand for their services during the pandemic. The most successful producers that ship are those that offer premium meat products, such as beef.”

Another model, a food hub or producers’ cooperative, coordinates a group of producers to jointly aggregate and distribute their food products. The USDA Agricultural Marketing Service maintains a directory of U.S. food hubs. A food hub may hire staff and purchase a box truck to deliver food products to an urban center. The group can specialize in a certain product, such as meat, or offer an array of food products from fruits, vegetables, grains, dairy, breads and meat. “The food hub will take orders from customers online,” Thilmany says, “and then deliver the orders to a centralized pick-up location.” 

Because of the pandemic, many consumers have grown accustomed to purchasing food online. Thilmany theorizes that people may continue to online order the “middle of the store” items — canned goods, breads, condiments, paper products, etc. They care more about the quality and source of origin of “outer rim” store items — the meats, dairy, vegetables and fruits, etc. — and may often want to select those food products themselves in the grocery store or directly from a producer.

Record sales

Farmers and ranchers that direct market their food products saw record sales in 2020, and now seek to retain their new customers. “Do everything you can to build a deep, authentic relationship with your buyers and offer exceptional customer service,” Thilmany recommended. “You want to make your product quality and buying experience worth your food products higher price point and the inconvenience of the customers’ extra trip.”

In a recent national survey about how producers found new customers, word-of-mouth and social media ranked the highest. Social media accounts and websites must be kept up-to-date and provide an easy customer ordering process. The CSA Innovation Network compiled a 2020 Farmer to Farmer Ecommerce Platform Report based on a national survey of producers that direct market. It summarizes the Ecommerce platforms available and the pros and cons of the different direct-to-consumer food purchase platforms.

Word-of-mouth marketing has proven its value since humans first gathered to visit with their neighbors. Thilmany says to enlist your network of friends and family. “You can accelerate word-of-mouth by giving your friends and family coupons to pass out to their networks, which will encourage people to purchase your food product. This is a way to utilize the powerful network of people.” That’s the purpose of selling food direct-to-consumer: some customers want to know where their food originates and the farmer or rancher that grew it.

[Melissa Hemken writes from Lander, Wyo.]

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