The Dignity Deal:Creating Profitable, Wholesale Distribution Networks for Mid-Sized Farmers
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Transcript of The Dignity Deal:Creating Profitable, Wholesale Distribution Networks for Mid-Sized Farmers
The Dignity Deal:Creating Profitable, Wholesale Distribution
Networks for Mid-Sized Farmers
Community Food Security Coalition Conference
Sunday, October 17, 2010
Betty MacKenzie, Co-director, Red Tomato
The Dignity Deal Creating Profitable, Wholesale Distribution Networks for Mid-Size Farmers
I. Introductions/Context/Getting started (15 min)• Introduction• The Handouts• About Red Tomato & Some Basics• About Eco Apples
II. Typical Distribution, Deals & Effects (15 min)• Picture of Distribution• Characteristics of a Typical Deal & the Undignified Results• Losing the Middle & Strategies for the Middle
III. Product Differentiation and Dignity pricing (15 min)• How We Differentiate our Growers & Products
IV. Aggregation & Consolidation (5 min)• Making the Order Happen for the Customer
IV. The Dignity Deal and the Challenge of Scaling Up (15 min)• the Dignity Deal Basics• Characteristics of the Dignity Deal• Ways it does Not Work & Ways it does Work• Goal is Grower Satisfaction
Q&A throughout─please interrupt
Red Tomato Basics
business fundamentals—for everyone--right product, right price, on-time, paperwork, insurance,
good communication with customer, etc.
product differentiation packaging unique logistics ─transportation: grower, partner, hired ─consolidation – usually at one grower facility ─product cluster design for gaps and longevity risk management/shared risk feedback loops Dignity Deals
The Eco Apple Story
Lyman Orchards Middlefield, CT
Scott Farm Dummerston, VT
Sunrise Orchard Cornwall, VT
Alyson’s Orchard Walpole, NH
RT Co-director, Michael Rozyne, and farm manager, Homer Dunn
Picture of distribution Characteristics of typical deals Effect on midsize farms Strategies for “the middle”
II. Typical Distribution, Deals & Effects on the Market
A Picture of Distribution
Dramatic, steady loss of farms in the middle, with wholesale capacity
Picture the middle of the distribution system as the BOTTLENECK of an hourglass. Control lies at the bottleneck.
Characteristics of Typical Industry Deal
Risk shared disproportionately Remainder pricing; growers takes what’s left No feedback loops between consumer/farmer; none
or few between buyer/farmer (Silence = all is well?) Externalities (pollution, public health, farm workers,
etc.) not part of the conversation; not reflected in the cost
Large distance between grower and consumer (in space and time)
Farmer is not at the table for strategy and price making
The Undignified Result of Typical Deals
Price becomes driver Unreal costs Lower product quality Ignorance, mistrust Lacking control at the bottleneck Resulting in farm loss
We’re Losing the Mid-Sized Farms
Value-Added
Commodity
Very Small
Very Large
1. Direct Sellers
2. Cooperative Sellers
3.Low Margin/ High Volume4. TROUBLE
ZONE !!!
Farmers’ MarketsCSA’s
Internet Sales
Strategic Alliances&
Food Value Chains
Mid-sized Farms Wholesale
Commodities
Large-scalecommodity Producers
Steve Stevenson
Ag of the Middle
Strategies for Farmers in “The Middle”
Value-Added
Commodity
Very Small
Very Large
1. Specialty – Direct Sales
2. OPPORTUNITY
3. Large-scale Deals
4. TROUBLE ZONE
Mid-scaleCommodityProducers
Differentiate with Value-added Attributes Aggregate for necessary volume New kinds of business rules A Need for Dignity Deals
Steve Stevenson
Ag of the Middle
Farm Identity Intrinsic Products Packaging Advanced IPM (Integrated Pest
Management) Fair Trade Branding & Storytelling Grower Differentiation
III. Product Differentiation
We Differentiate Growers and Products (decommodify)
Examples of
“decommodified”
Red Tomato products
Locally-grown: farm identity preservation
(Farm name and location at bottom of package)
Creating intrinsic product: packaging, pack, grade, variety
Packaging
Heirloom Baskets
Heirloom Boxette
Ecologically-grown: organic and advanced IPM
Picking apples at Truncali Orchard, Marlboro, NY
Fair Trade: worker and farmer well-being
Brand and Storytelling
Grower Differentiation
IV. Aggregation and Consolidation
Kiwi CornersDanville, PA4 pallets kiwis624 cases
WFM/NoACheshire, CT
Scott FarmDummerston, VT5 pallets heirloom apples 150 cases
Black River ProduceN. Springfield, VT
Lyman OrchardsMiddlefield, CT4 pallets apples, 120 cases
Blue Hill OrchardsWallingford, CT5 pallets apples, 150 cases
Mother Earth MushroomW Grove, PA
$0
64¢
3 pallets
kiwi
1 pallet k
iwi
32¢
To: WFM/TexasArrives on Monday
$3.40
14 pallets apples1 pallet kiwis
$1.25
MondayTuesdayWednesdayFriday
Red Tomato Grower
Customer
Trucking Partner
$0
Eco Apple Logistics
Making an Order Happen for the Customer
(costs are for each leg of the trip)
The Dignity Deal Basics Characteristics of the
Dignity Deal Packaging Advanced IPM Fair Trade Branding & Storytelling Grower Differentiation
V. The Dignity Deal - the Challenge of Scaling Up
The Dignity Deal BasicsNot a formula, rather a process—our way of doing business
Based on values- Fairness, Transparency, Shared risks and rewards,
Triple bottom line accountability, (Economics, Social, Ecological)
Baseline- Striving for freshness and flavor through commitment to
continuous improvement
Origins of dignity pricing- Began with costs of production + reinvestment and
fair/limited profit- Unrealistic. Developed the Dignity Price
Characteristics of the Dignity Deal
Risk sharing- Buyer commitment- Advance planning
Dignity pricing- Farmer is at the table
for strategy and price making
Externalities - Part of the conversation
Close the distance between grower and consumer—mental and spacial
Farm identity preserved Feedback loops
- Constant communication- Continuous improvement
Some Ways It Doesn’t Work
“I have not failed. I've just found 10,000 ways that won't work.” Thomas Edison
change in personnel & relationship loss sudden death—not seeing the whole WHOLE every detail counts—a packaging design
problem your stories?
When it doesn’t work
Some ways it does
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
2004 2005 2006 2007 2008 2009
Cases
Eco Apple Case Sales 2004-2009
Some more ways it does
0200000400000600000800000
100000012000001400000160000018000002000000
2005 2006 2007 2008 2009
dollars
Eco Apple dollars and acres 2005-2009
0
100
200
300
400
500
600
700
800
900
2005 2006 2007 2008 2009
acres
Grower Satisfaction
Barney and Chris Hodges
Sunrise Orchard – Cornwall, VT“…As a grower, Red Tomato has great value to my business... we have become better growers, which is exactly what we need…”
---Barney Hodges
Thank you
For more information, please visit:www.redtomato.org/resources.php
Slideshow created by Tim Huggins and RT Staff