A farmer friend of mine, let's call him Henry, has been selling lettuce mix at a price of $4 for an 8 ounce bag at a farmers' market in Toronto. On 20 bags his gross for the day is $80. Whole Circle Farm and another farmer I know charge $7 per 8 ounce bag. Another farm, The New Farm, charges almost double this price. Why is he charging such a low price?
Henry wants to provide some of his produce to customers who’re in a lower income bracket, hence the lower price. It fits with the philosophy of many farmers, that everyone should have access to healthy food. The challenge is, how to pursue this worthy objective and also get a fair price for their produce. Henry claims that other vendors at his market also charge $4 per 8 ounce bag, making it difficult for him to change his price even if he wanted to.
This got me to thinking about what Henry or any market vendor could do to make sure they fetch a fair price. Here are a few ideas:
An option for Henry would be to set a two tier price: If he brings 20 bags of lettuce mix to the market he could sell 15 bags x $7 bag = $105 gross. For low income customers he can offer them at a $3 discount. In other words, 5 bags at $4 each = $20. Henry’s gross for the day would be $125, $45 more than what he earns with his current pricing.
How would he know which customers to charge the $4 price? He likely knows them, and can offer the discount to them. However, that could be tricky if nearby customers see that they’re not getting a discount. Another solution would be to charge $7 for all bags sold at the market, and at the end of the day, give away 5 bags through a food bank. Other deserving families will get lettuce, and Henry, bless his charitable heart, will have more revenue at the end of a long day at the market. On 15 bags at $7 each his gross would be $105, $25 more than he currently earns, and $550 more for the season.
Here’s a summary of some possible pricing scenarios Henry could follow while still being true to his philosophy of providing food for everyone regardless of their income:
Henry wants to provide some of his produce to customers who’re in a lower income bracket, hence the lower price. It fits with the philosophy of many farmers, that everyone should have access to healthy food. The challenge is, how to pursue this worthy objective and also get a fair price for their produce. Henry claims that other vendors at his market also charge $4 per 8 ounce bag, making it difficult for him to change his price even if he wanted to.
This got me to thinking about what Henry or any market vendor could do to make sure they fetch a fair price. Here are a few ideas:
- Know Your Costs: The most important thing is to understand the cost to produce your products. Two good resources for this are "Organic Farmers Business Handbook, by Richard Wiswall. It explains how to do cost analysis. Another great book, Crop Planning for Organic Vegetable Growers, by Daniel Brisebois, explains how to break down production cost to bed foot per crop;
- Set Price Based on The Value of Your Product: Don't necessarily set price solely on what other farmers or vendors at your market are charging or, on the price charged by supermarkets. Perhaps the other farmers are following each other's lead, a likely scenario, since many farmers are price followers and takers, not price makers. Henry could consider discussing price with the other vendors. However, discussing price with your competition may be contrary to the Ontario Business Practices Act. So I can't officially encourage anyone to do that. Henry could simply point out to his fellow vendors that their market is priced well below other farmers’ markets;
- Sell Your Products and Yourself: Do a good job of explaining to customers the value they are getting: organic, local, freshly harvested. Whatever it is, talk it up. Having good signage on your table is important. Giving away samples of your vegetables is a good idea. Our Hakurai Turnip sold like cupcakes after customers had a sample from our market table.
An option for Henry would be to set a two tier price: If he brings 20 bags of lettuce mix to the market he could sell 15 bags x $7 bag = $105 gross. For low income customers he can offer them at a $3 discount. In other words, 5 bags at $4 each = $20. Henry’s gross for the day would be $125, $45 more than what he earns with his current pricing.
How would he know which customers to charge the $4 price? He likely knows them, and can offer the discount to them. However, that could be tricky if nearby customers see that they’re not getting a discount. Another solution would be to charge $7 for all bags sold at the market, and at the end of the day, give away 5 bags through a food bank. Other deserving families will get lettuce, and Henry, bless his charitable heart, will have more revenue at the end of a long day at the market. On 15 bags at $7 each his gross would be $105, $25 more than he currently earns, and $550 more for the season.
Here’s a summary of some possible pricing scenarios Henry could follow while still being true to his philosophy of providing food for everyone regardless of their income:
Suggested Pricing Scenarios
|
Price Charged per bag of Lettuce (20 bags weighing 7 oz each)
|
Gross Sales per Week
|
Gross Sales Increase per Week over the Current Pricing
|
Total Gross Sales in a 22 week Season
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Current Pricing
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$4 each bag
|
$80
|
n/a
|
$1,760
|
Two Tier Price
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15 bags x $7 ea and 5 bags x $4 ea
|
$125
|
$45
|
$2,750
|
One Price
|
15 bags x $7 ea and 5 bags donated at end of the day
|
$105
|
$25
|
$2,310
|
Whatever Henry does, it would be easier to implement any changes before the new season starts.
