1. FARM SHOP SELLING and MARKETING
MWE TOI PROJECT Mentoring Women for Entrepreneurship Project Nº ES1-LEO
FARM SHOP SELLING and MARKETING

2. Introduction

3. Introduction
Due to a number of incidents and crises in relation to food safety, hygiene and product labelling, the traditional food chain as we know it has been undermined recently.
Moreover, consumers have become increasingly aware of their economic and social responsibility as well as environmental issues that are intrinsically linked to food production. This has sparked interest in learning how, where and by whom food is produced and handled in the process of getting to our plates.
Consequently, and in light of both previous crises and changing awareness of issues related to food production, the agri-food sector has seen a transformation whereby consumers are more and more inclined to buy food locally and directly from farmers.

4. Module Objectives
The module offers definitions on concepts of ‘Farm Shop Selling & Marketing’. It sets out the EU and national legal frameworks in which farmers operate and presents the benefits of food processing and direct selling such as socioeconomic and environmental advantages while simultaneously explaining some of the challenges often faced by farmers. In simple terms, the objectives of the module include:
introduction of necessary knowledge and expertise on farm food processing and direct selling
identification of challenges posed in attempting to meet the growing demand for locally produced food
outlining the variety of tools offered by the EU in order to facilitate marketing of locally produced food by local farmers

5. Definitions

6. Farm Food Processing
The journey of food produce from farm to plate is called a food supply chain. It entails a number of processes including food production, processing, distribution and consumption. Processing – being part of the food supply chain – is defined as ‘any activity that maintains or raises the quality or alters the physical or chemical characteristics of raw ingredients’. This element of the food chain is crucial in that it helps better preserve agricultural produce which is in a raw state often quickly perishable.
“Food processing is the treatment of a food substance in such a manner as to change its properties with the intention of preserving it, improving its quality, or making it functionally more useful.”

7. On-farm Processing
There are two types of Food Processing: On-farm processing refers to any activity that has to do with harvesting crops or raising livestock which are then processed into a new and different product on the farm. Such activities vary from quick and easy (e.g. drying, grounding) to complex and long (e.g. cheese-making).
Industrial Food Processing
On-farm Food Processing

8. On-farm Processing Among others, food processing operations include:
Raw material handling (washing, sorting, separating, grading, packing)
Size reduction (cutting, chopping, shredding, crushing, grinding, milling)
Mixing (feed, fruits and vegetables, fertilisers and soils, composting)
Drying (grain, hay, fruit and vegetables, powders)
Heat treatments (pasteurisation, boiling, steam or thermal sterilisation, frying, baking, convection and radiation methods)
Cold treatments (freezing, ice cooling using units such as dairy coolers, freezers, controlled atmosphere storage structures)
Chemical treatments (i.e. fungicides / insecticides on grain seeds, substances to improve shelf life and appeal of processed fruits, meat or dairy products, stabilisation of food texturally)
Biological treatments

9. Direct Selling - Introduction
In very simple terms, direct selling is the marketing and selling of products and/or services directly to consumers, without the use of an intermediary (i.e. wholesalers; retailers). Intermediaries, or so-called distribution channels, are interdependent entities which act as middlemen or agents between producers and consumers. They are part of, and facilitate, the food supply chain. When the number of intermediaries is particularly small and they work towards the benefit of the local economy, we call this a ‘short food supply chain’.
The EU has defined ‘Short Supply Chain’ as one which involves “a limited number of economic operators, committed to co-operation, local economic development, and close geographical and social relations between producers, processors and consumers” (Reg.  (EU) No 1305/2013).

10. Direct Selling - Introduction
The added value of a ‘short-supply chain’ contributes to local communities in a number of ways. First of all, by cooperating, enterprises and farmers participating in local food projects have better chances of finding new ways to sell their products. Secondly, a ‘short-supply chain’ has a trickle-down effect on other industries such as tourism. Thirdly, locally produced and consumed food can have both environmental and social benefits. Transportation of food is no longer necessary and this delivers savings on transport costs, fewer CO2 emissions, safer and less congested roads. Finally, producers engaged in direct selling often see their income margin increase as they receive proportionately more from the product’s price as the food chain excludes retailers and wholesalers.

11. Direct Selling as Change of Demand
In the past few years Europe has noted a dynamic and rapidly expanding demand for direct selling by local farms. This means that farmers increasingly sell their home-grown and home-made products directly to their consumers on their farm or in an area reasonably close to the farm of production. Consumers’ expectations as regards food quality (e.g. freshness, safety and limited processing) and its geographical origin (i.e. products locally produced) have changed and they attribute more importance to quality and localness. Consumers prefer buying products directly from their local farmers as this way they can ensure the origin, characteristics and quality of the products.

12. On/Off-farm Selling
Direct selling of one’s own processed food products can be realised either on-farm (e.g. farm shops, roadside sales) or off-farm (e.g. farm stands, farmers’ markets, collective farmers’ shops, food festivals and fairs, delivery schemes). On-farm sales may also include products offered by didactic farms engaged in agri-tourism or related educational and recreational activities (i.e. farm-based hospitality). On the other hand, off-farm sales are often realised via a single trade intermediary of the likes of cooperative shops. Another and innovative way how to sell food products off-farm is via web platforms which facilitate sales on the internet.

13. Other Types of Direct Selling
Except for where the food products are sold (on-/off-farm) we can distinguish direct selling also based on who those products are sold to.
For example:
Direct to Consumer selling: which includes community supported agriculture, solidarity purchase groups.
Direct or semi-direct (through cooperatives) to Retail/Foodservice selling: supplying local shops, restaurants, caterers, grocers and specialty food stores.

14. Other Types of Direct Selling - Continued
Community supported agriculture (CSA) refers to a mutual agreement or partnership between consumers and producers in which consumers contract or buy shares in farm products in advance and producers commit to supply a range of products over the entire season. Consumers often have an opportunity to participate in planting, cultivation and harvest and play a direct part in the production process. Solidarity purchase groups are groups of households that cooperate in purchasing food and other goods directly from producers on the basis of ethical and environmental criteria and considerations of solidarity between the members of the group, the traders and the producers. These groups form a movement which rejects the dominant model of consumption and whose aim is to build a more sustainable economy (minimise the environmental impact of transport, fair-trade goods, respect disadvantaged producers, promote reusable or eco-compatible goods).

15. The EU and National Legislation

16. Direct Selling in the EU
According to a study mapping the main features of local farming and direct sales in the EU published by the European Commission (December 2013), Europe shows a significant divergence as far as direct selling is concerned. There is an array of schemes for development of direct sales in individual Member States. This diversity is due to national and regional differences in farm structures, distribution channels, etc. Divergence across EU Member States is also attributed to an inconsistent application of the available EU and national tools and asymmetrical development of local food systems. On average, some 15% of farmers sell at least half of their produce to consumers directly. However, there are significant differences between countries (Greece 25%; Spain 0.1%).

17. Direct Selling in the EU

18. Direct Selling in the EU
Farms engaged in direct selling are dominantly small or micro enterprises which often operate in conjunction with a variety of other activities such as organic farming or sustainable production techniques.
Most commonly traded products by these farmers are:
Fruit and vegetables (mainly fresh)
Animal products, principally meat (fresh and prepared)
Dairy products
Beverages
These products are mostly sold to and at local and/or regional markets. However, quality certification schemes and conformation to EU hygiene law can be administratively burdensome for farmers wishing to sell their produce directly. Moreover, farmers are often prevented from selling their products to public institutions due to difficult EU public procurement rules.

19. Common Agricultural Policy – Legislative Framework
The most common type of farm in the EU28 is small holdings of an average size of 14 hectares. However, due to the historical, economic and political structures of Member States, there is a great variety of farm enterprises in Europe. Small farms are more “multifunctional” which makes them more economically beneficial to the farming industry and society as a whole because they maintain biodiversity, preserve soil and landscape, are more efficient, contribute to food security and protect cultural heritage. The strategy aims to build a competitive, high-employment economy based on knowledge and innovation delivering social and territorial cohesion.
The “Europe 2020” EU’s growth strategy: ‘A strategy for smart, sustainable and inclusive growth’:
Smart through more effective investments in education, research and innovation;
Sustainable – move towards a low-carbon economy;
Inclusive – with a strong emphasis on job creation and poverty reduction.

20. Common Agricultural Policy – Legislative Framework
In response to the new economic, social, environmental, climate-related and technological challenges, the Common Agricultural Policy (CAP) has recently been reformed to achieve more competitive and sustainable agriculture and vibrant rural areas. The CAP supports multiplicity and maintenance of viable agriculture that ensures food security.
"Increasing the role of local food systems is an answer to a clear expectation among EU citizens. It is also particularly important for farmers and for the diversity of EU agriculture. Via direct sales and closer contacts with consumers, EU farmers can add value to their products, boost their sales and better understand the expectations of EU citizens with regard to food and food production methods. That's why we want to encourage farmers to develop local food systems and to discuss the best ways to increase the visibility of their products“
Commissioner Dacian Cioloş

21. CAP –Rural Development Directive
The new CAP has incorporated a number of measures that aim to support direct marketing and improve the competitiveness of producers by better integrating them into the food chain.
Rural Development Policy, Regulation (EU) 1305/2013 has introduced:
horizontal and vertical co-operation among supply chain actors for the establishment and the development of short supply chains and local markets
promotion activities in local markets and short supply circuits
advice and information, support for participation in quality schemes, adding value to agricultural products
farm and business development, producer groups, inter-branch organisations

22. Rural Development Policy: Objectives
The objectives of the Rural Development policy include:
Response to consumers’ interest in buying quality food directly from a farm or short circuits.
Restoration and development of a mutual trust between producers and consumers
Aiming for fairer prices for farmers; restoration of imbalances in market and strengthening producers’ market power
Providing the producers with tools to improve competitiveness through diversification and marketing in short supply chains.

23. CAP – European Quality Product Policy
European Quality Product policy (Regulation (EU) 1151/2012) has been put in place to contribute to and complement the rural development policy as well as market and income support policies of the CAP. The quality product policy helps better identify and promote products with specific characteristics while protecting producers against unfair practices. Moreover, the Commission has allowed, via the use of delegated acts, for the use of the optional quality term “from my farm” to simplify direct promotion to consumers. As an initiative of the European Commission, the EU is currently undergoing a debate on establishing a local farming and direct sales labelling scheme.

24. CAP – European Food Safety Policy
To ensure a high level of protection of human health and to look out for consumers’ interests, the EU makes use of the European Food Safety Policy (Regulation (EC) 178/2002). To this end, the policy carefully considers protection of diversity (including traditional products) whilst it oversees the effective functioning of the internal market. In essence, the EU runs an integrated approach of food safety from farm to fork, covering all sectors of the food chain – including feed production, primary production, food processing, storage, transport and retail sale. Reg. (EC) 178/2002 lays down the rules applicable to the safety of food and feed circulating on the internal market, establishing a framework for controlling and monitoring the production, prevention and management of risks and establishing the European Food Safety Authority.

25. CAP – Food Safety Legislation
The EU’s comprehensive food legislation protects consumers against fraudulent or deceptive commercial practices. It also safeguards the wellbeing of animals, health of plants and environment. Community legislation on food hygiene covers all stages of the production, processing, distribution and placing on the market of food intended for human consumption - (Reg. (EC) 852/2004, 853/2004, 854/2004, 882/2004, Dir. 2004/41/EC). Processed agricultural crop and livestock products intended for human consumption are subject to strict food safety regulations that are specific for each type of food and production process.

26. Farm Food Processing and Direct Selling: What are the Benefits?

27. Benefits: For Producers
Higher and more secure farm household income:
Lower production costs (e.g. reduction in transportation, storage and packing costs)
Fairer price for their products as farmers bypass middlemen
More effective use of labour resources previously not made use of (e.g. for processing, marketing)
Diversification of operations which in turns increases viability of the farm
Better understanding of customers and their needs

28. Benefits: For Consumers
Cost savings: product prices are lower compared to those offered by traditional long food supply chains with a high number of intermediaries.
Meeting the growing demand for high-quality farm products sold in short supply chains.
Solution to growing concerns of consumers as regards social and environmental costs of food production (“food miles”, waste and residues of packaging, environmental burden of agriculture).
Due to exchange of information between consumers and farmers there is higher awareness of farming and food related activities.
Consumers have a chance to reconnect with the countryside and discover local gastronomy and rural culture.

29. Benefits of Direct Selling
In general:
Direct selling can improve the competitiveness of rural areas. Functioning local food systems have a multiplier effect on the local economy creating, for example, employment opportunities or synergies with local businesses and tourism sectors
Direct selling leads to better transparency and traceability in the supply chain
Safeguards agricultural functions in disadvantaged areas: differentiated quality products can benefit the rural economy especially in less favoured areas, in mountainous areas and in the most remote regions, where the farming sector accounts for a significant part of the economy and production costs are high
Favours the interaction and contact between farmers and consumers, thus promoting the development of trust and social capital, facilitating behavioural changes in healthy eating habits.

30. Food Production and Consumption: Food Safety

31. Production: Safe food handling
European farmers have the responsibility to comply with all EU and national regulations concerning farm products for the purpose of ensuring food safety, quality control and consumer protection. Compliance with regulations is of the essence at all stages of the food supply chain.
This is because:
Agricultural inputs, such as plant propagation material, fertilisers, pesticides and water quality pose various risks and require specific attention.
Animal feed containing pathogens may also pose specific risks.
The use of chemicals for plant protection, pest control and veterinary drugs may lead to unsafe levels of these chemicals in the food supply, for instance in red meat and poultry products and agricultural crops.
It is considered highly important for the farmer to follow the rules on the hygienic aspects of the produce handling operations and precautions during the use of chemicals or equipment.

32. Processing: Safe food handling
Special attention is required during processing for several potential hazards
microbiological (pathogen, bacteria)
foreign bodies (glass, insect, wood)
chemicals (food additives, cleaning and disinfection products’ residues)
allergens (gluten, egg)
Control of the process flow to avoid cross contamination, keep records to facilitate traceability

33. Processing: Safe food handling
It is widely recognised that most foodborne diseases occur as a result of incorrect handling in preparation of food for consumption. Hygiene standards need to be upheld: cleaning and disinfection of surfaces, facilities and equipment, maintenance of all processing equipment, training of personnel, waste management Practices and conditions regarding storage, transport and distribution of foods can have an influence on product safety. Food handling, preparation and storage require special provisions with regard to hygiene, safety, pest and sanitation control.

34. Farm Shop Selling & Marketing: Challenges

35. Challenges
Although the EU legal framework allows for and helps farmers to sell directly or via short food chains, compliance with the variety of food laws as well as consumers’ information requirements (often very complex to master) may represent administrative costs too burdensome for small-scale farms.
Challenges:
The key challenge is the preservation of the local food systems which represent the diversity and richness of the EU agriculture and unlock their full economic potential.

36. Challenges To this end it is necessary to:
Train producers so as to acquire knowledge and develop skills on several aspects about processing procedures and storage, customer service, marketing of agricultural products and foodstuffs
Improve inefficiencies in the logistics infrastructure
Tackle the inadequacies of facilities on farms, storage limitations: undertake investments in processing facilities, certification schemes, packaging
Reduce financial constraints to access capital
Cope with administrative burden, documentation and costs
Simplify food hygiene legislation: Difficulties for small-scale farmers to comply with food hygiene legislation is considered one of the main difficulties to developing vertical integration of production and direct selling

37. Challenges - continued
Encourage the development of producers’ organisations or the reinforcement of existing ones so as to strengthen the position of farmers in the market
Facilitate competition with major market players – cooperation and synergies could enable procurement coherence on a larger scale to meet growing demand
Underpin information and promotion activities to tackle insufficient knowledge and identification of locally produced products and foodstuffs, as well as a lack of information on how to access them
To take a more proactive role, as far as Member States are concerned and adapt national legislation in terms of food production and distribution, trading laws and taxation, hygiene rules and also facilitate administrative procedures and access to investment and knowledge

38. Direct Selling and Farm Marketing: Farm Entrepreneurship

39. Direct Selling: Personal Characteristics
Have you got what it takes to be a Direct Marketer for your farm?
Personal qualifications (knowledge of production and processing operations, selling techniques, communication skills)
Production capabilities so as to be able to supply the variety, quantity and quality of products your customers need (infrastructures and adequate labour force capacity)
Merchandising and marketing strategy (product, price, place, promotion): understanding of your product qualities and how to meet the needs of targeted customers
Logistics (transportation infrastructures, space and location, convenient access)

40. Direct Selling: Business Factors
In order to become a successful Direct Marketer, a farmer needs to take into consideration:
Business factors (investment needs, sufficient capital, feasibility assessment and a projected cash flow, good financial management practices)
Competition from other marketing operators, current and potential
Necessary business licences
Knowledge of regulations affecting the type of products produced and sold as well as legal restrictions limiting the type of operation

41. Farm Direct Marketing: Critical Success Factors

42. Critical Success Factors
The first and crucial step en route to success is to have a solid business plan. This requires good planning, making key financial decisions and completing a series of legal activities.
Business plan outline:
Executive summary
Description of business
Products or services (description of existing and proposed ones)
Market Analysis: an analysis of strengths, weaknesses, opportunities, and threats (SWOT) from internal and external factors involved in in a business venture.
Marketing Strategy: includes the competitive strategy for your target market where your business fits into the market and how you will price, promote and sell your product or service

43. Critical Success Factors

44. Critical Success Factors
Business plan outline:
Management Summary (business structure, human capital, roles and management of personnel)
Financial Analysis: financing details of your business, estimation of operating expenses, evaluation of investment, needs for future growth
Appendices and supporting information

45. Product and Process Quality
A successful farm direct marketing requires a constant supply of quality and safe products in a clean and customer-friendly environment.
In Europe, demand for high quality and safe local food is combined with environmental, climate and social expectations. Therefore farmers are encouraged to offer products processed by the use of sustainable production methods and under optimum environmental management.
Short production and distribution chains could contribute to social, economic and environmental sustainability
combining local and seasonal characteristics reduces storage needs
ecologically sound production methods may contribute to environmental sustainability (reduced use of pesticides, monitor water usage, water pollution and soil degradation, minimising carbon emissions and food waste) and provide social benefits (public health)

46. Relationship Quality
However, it does not often suffice to simply offer high quality products. Other practices to attract customers may be necessary (e.g. communication with the farmer or a member of the family, involvement and participation in the production or processing process, the ambience of direct sale: use of traditional costumes, exhibition of products in renovated old farmers’ stores). Direct selling can be enhanced by fostering the relationship between producers and customers who should be able to enjoy buying the products. Therefore direct selling involves not only a high quality product but also a high quality interaction with the salesperson. A farm to consumer marketing strategy should not overlook the training of salespeople.

47. Relationship Quality
The basis of farm direct marketing is the trust relationship that is developed between producers and consumers and the producer should understand consumers’ preferences and needs.
Some factors driving consumer trends for local produce include:
Perceptions of quality (nutrition, fresh)
Assurances of safety and public health benefits
Support for the local economy, farms
Environmental benefits, farmland preservation
Insights in relation to production and processing of food

48. Questions marked with * indicate that multiple answers are possible.
Comprehensive Test
Questions marked with * indicate that multiple answers are possible.

49. True or false? A food supply chain is the journey of a food product from a farm to our plate and consists of four stages: production, processing, distribution and consumption.
a) True
b) False
Which of the below are types of food processing? *
a) Industrial food processing
b) On-farm food processing
c) Both
d) None of the above
In simple terms, direct selling is the marketing and selling of product and/or services directly to consumers, without the use of…
a) Wholesalers
b) Collective farmers’ shops

50. Which of the following is NOT associated with off-farm direct selling?
a) Farm shops
b) Farm stands
c) Farmers’ markets 
True or false? Farms engaged in direct selling are predominantly small or micro enterprises.
a) True
b) False
Which of the two following policies helps better identify and promote products with specific characteristics while protecting producers against unfair practices?
a) European Food Safety Policy
b) European Quality Product Policy

51. Which of the three options below are not benefits of direct selling for producers: *
a) More secure income
b) Cost savings
c) Awareness of farming and food related activities
True or false? It is considered highly important for the farmer to follow rules on hygienic aspects of the produce handling operations and precautions when using chemicals or equipment.
a) True
b) False
What is the key challenge for producers when it comes to direct selling?
a) Insufficient food safety legislation
b) Preservation of the local food systems

52. Along with a constant supply of quality and safe products, for direct selling to be successful, which of the following are equally important? *
a) Sustainable production methods
b) Environmentally-friendly production methods
c) Products which are cheaper than in supermarkets