Growing your customer base: Where farmers are looking to diversify their operation

For decades, most Canadian farmers have relied on a single dominant buyer – often a large processor or U.S.-based distributor – to get their products to market. But the recent and ongoing upheaval in trading relations with our neighbour to the south, many farmers are looking for other options.

Despite how common it is for farmers to have one big seller, becoming too reliant on one customer can create vulnerabilities. Even with a long-lasting and well-established relationship with that one customer, Canada’s evolving economic conditions make it difficult to predict when change might be coming, resulting in unexpected and often significant financial volatility.

This volatility can cause farmers to see less access to capital from higher costs of debt and equity, fewer ideas implemented from less investment into R&D, and a reduced number of entrepreneurs in agriculture as individuals are drawn to other industries and fewer farms transition to the next generation.

While aggregators can reduce time and effort spent by farmers in marketing their products, it can result in lower prices and dependence. Since the beginning of the COVID-19 pandemic, a trend has emerged that sees farmers expanding their reach and branching out to more customers.

Who else can I sell to?

Direct-to-consumer

Local

• Selling to individuals, direct to end user, involves building a supply chain but allows the farm to keep more profits per unit. However, it can be difficult to scale up (e.g., farmers’ markets and stands).
• Selling online through social media may help build a supply chain faster but delivery logistics can be complicated. Some companies, like Odd Bunch, can match consumers with farmers to build those supply chains on their behalf.
• In a retail setting, like grocery stores, there’s less effort needed to build the supply chain, but many are looking for produce year-round which can be difficult for Canadian farmers to keep up with.
• Selling to restaurants can give exposure but makes it more difficult to scale sales as restaurants usually purchase small volumes of produce.

International

• Selling to operations and people outside of Canada provides significant opportunity but many Canadian farmers are not familiar with foreign exchange markets, business practices, and the increased risk of payment. The Economic Development Corporation (EDC) can help farmers navigate international markets.

Marketing Co-ops

• Establishing or participating in a marketing co-op can help farms gain access to bigger customers and economies of scale

Direct to business

Processors and packers

• If a processor or packer sets up in your area, there could be significant opportunity to access another customer. A processor generally won’t build a plant without the guarantee of a certain level of production; early adopters that are already growing this crop in the area or a group of farmers teaming up to ensure production can expand customer base.

How to expand your customer base

Every farm is unique. Some may have opportunity for large-scale growth where others may be less inclined to take the risk and stray from their normal way of selling product.

While the push to buy local produce remains strong across Canada, price and availability are significant factors to consider when thinking about expanding your customer base. Canadian farmers can grow a variety of crops but ensuring they are available for all 12 months of the year is a serious consideration and a hurdle to many farmers.

The global farming market has evolved in a way that silos many agriculture producers to continue growing what they are good at and then trading those items for products that other countries can produce more efficiently.

Here are some things to consider if you’re looking to grow your customer base:

1. Location
   • Which markets are accessible to your farm through transportation chains that are readily available and at a reasonable price?

2. Opportunities
   • What types of crops are consumers demanding in your area?

3. Strengths
   • What types of crops can you grow with your land, labour, and expertise?
4. Regulatory barriers
   • What rules do you have to follow to grow certain crops? Do your customers have regulations around organic products or sustainability practices?

Exploring the possibility of diversifying your customers can be complex and costly. Fortunately, you can take stock of your operations and determine the best opportunities for you and your farm with the help of experienced MNP advisors.

Visit our page to learn more about how MNP can help set you, and your farm, up for success in this evolving economy.