Selling Beef Directly to Consumers
The mid-Atlantic region is a prime location for direct sales of beef to consumers. Production units and farms are in close proximity to the customer, and this is a great advantage to many beef producers. There are several considerations in making direct sales successful.
There are a number of ways beef producers can sell directly to consumers. These include:
Farmers' markets: These markets are available in many communities. The key issues to consider are cost to attend markets (time, labor, refrigeration, storage and transportation), identification of customers at specific locations, signage, product liability, processing with federal inspection and product diversity.
Freezer beef: The most popular method of direct sales is freezer beef. In most cases, cattle are sold on a hot carcass weight basis in quarters, sides and whole carcasses. Working with processors is a key issue to make sure customers are properly communicating with the processor about how they want the carcass fabricated (identification, size and weight of cuts). Producers must also think about how they will handle unsold portions of a carcass, the possibility of returns from unhappy customers, and providing customers with proper information about how much boneless product will be available from a hot carcass.
On-farm markets: Many farmers maintain a freezer at the farm and sell directly to customers. In many cases, experience shows this is very effective with proper customer traffic regularly available, but there are often unsold portions of the carcass, particularly ground beef. This requires processing under federal inspection, and packaging (freezer wrap versus see-through vacuum packaging) can be an important issue.
Online sales: Sales through a website are often a secondary market. Computer technology and website maintenance, maintaining the ordering and shipping process, legal issues from labeling, and a supply chain for products listed for sale are problems that are often encountered. Price points are usually higher than with other outlets.
Community supported agriculture (CSA) sales: Packaging fruits, vegetables and meat for customers enrolled in a CSA can be an effective way to market products and maintain product inventory (the producer can often make the choices of what product will be included in each shipment.) This system requires cooperation among many farmers, and recruitment and retention of a number of customers is an ongoing process. The CSA often employs a centralized entity for organization and logistics.
Roadside markets: Permanent roadside food markets are meeting the demand for locally produced food. Usually these markets feature fruits and vegetables, but many are now including baked goods and fresh and processed meats. The volume of fresh meat in these outlets is usually low, so the site is often used as a means to identify customers for other direct sale outlets, such as freezer beef.
Restaurants and food service: Food service is often the most difficult outlet for producers to manage, and products are usually sold at a wholesale price point. This market requires a very consistent supply of similar products year-round, so small producers usually cannot meet this need. Since a limited number of cuts can be sold in this market, there must be an outlet for the remainder of the products of the carcass. It is an excellent source of farm identification and promotion if menus include the source farm.
I recently interviewed a number of farmers who are direct-marketing their beef, and there are some common issues that almost always appear:
1 Time. As both the producer and the marketer of the products, many farmers have found time is the largest cost they encounter. This is common across all outlets, because handling the cattle, transportation to and from processing, transportation to and from markets, working on advertisement and promotion, marketing the product, working with processors, and communicating with customers often limits the time available to actually produce the cattle and maintain the farm.
2 Cost of production. Many farmers have no idea what the steak they just sold actually cost them. Production costs are only part of the cost. Processing, storage, transportation, advertisement and the time noted above are all overhead costs associated with each product sold.
3 Pricing. Farmers who are successfully marketing their beef tell us they cannot price their products until they know all their costs for whatever market they sell in. It must be clear how much salable product each carcass will produce and how the values of those products vary. Other issues used in pricing include current commodity beef prices, competitors' pricing points, the specific customers available, and maintaining product inventory.
4 Multiple markets. In nearly all cases, there are multiple markets required. Most producers using farmers' markets are selling freezer beef as well. Those selling into food service must have an outlet for ground beef or higher-priced cuts. Those selling in CSA markets or online must have outlets when order patterns change with the seasons or due to general economic issues. Roadside markets are usually low-volume and many times feature only specific cuts, so the rest of the carcass must be sold elsewhere.
5 Supply chain. Extensive long-range planning is needed to have a supply of products that meet the needs of the market. Many processors may require booking cattle for harvest at six months ahead or more. Weather conditions that may affect pasture availability, feed prices, reproductive rates in a cow herd, animal health problems, and product storage space are all issues that must be coupled with the availability of specific products at a specific time.
6 Identification of customers. A common misconception is that farmers believe customers will like what they like for cuts and cut sizes. Direct marketers often relate that this is an issue they had to overcome. Customers have a wide range of tastes and needs, and the producer must be able to adapt cut size, cuts, packaging and price to satisfy the customer.
Customers vary by age and other demographics. For the customer born after the mid-1980s, it is about how it was produced and knowing it is local. For the Gen X customer, it is about price and convenience. For the Baby Boomer, it is about nutrition, eating satisfaction and access. Coupling these differences with the economic profile of a particular market location shows the matrix of products, pricing and customer communication.
Information is available on the Penn State and Cornell University Department of Animal Science websites that can provide some specific tools for assisting producers in marketing beef directly, including summaries from several successful farmers. Cooperative extension educators can assist farmers with identification of cost and production economics.
Dr. John Comerford is an associate professor and extension beef specialist at Pennsylvania State University.