May/June 2024 - 13

FARM MARKET
Keeping up with
the competition
To determine prices, most
farm market managers consider
a number of factors, including
competitors' pricing (58%), input
costs (51%), grocery store prices
(40%), availability of product (39%),
grower input (28%), profit margins
(22%), or based upon a specified
set of markups (9%). Twenty-five
percent chose " all of the above " to
the question.
Brian Moyer, education program
associate with Penn State Extension
and founder/director of PA Farm
Markets, noted the majority of
respondents in part base their prices
on their competitors' pricing - a
practice he counseled farm market
operators to avoid.
" It is good to know what your peers
are selling and how much, but don't
let it be the driver of your pricing
strategy, " he said.
On the other hand, using expenses
such as inputs, and considering
multiple factors in determining prices,
is a smarter strategy, Moyer said.
Basing prices on the competition's
pricing " means you are letting
someone else set your price, " he said.
Pricing considerations
In questions about the " three Cs
of pricing " (costs, customers and
competition), 82% of respondents
noted they set prices with an eye on
sensitivity to what their customers
will support, with more than 75%
basing prices on costs. Competition
was of less importance, but still
garnered 48% in the higher ratings in
a scale of 1-5 importance.
Cost-plus pricing is a common way
to price products and works well if
the marketer understands the kind of
profit margin required, Moyer said.
In rating the top price markups,
most farm markets add 20%-40%
with less than 20% choosing 50%-60%.
In the value pricing method, Moyer
recommends that farm markets
determine the unique qualities of their
produce, such as freshness, distinctive
varieties or organic certification.
Nearly 60% of those polled charge
more for specific fruit varieties,
while 49% charge more for particular
vegetable varieties. In last year's
survey, 56% stated they charge more
for specific produce varieties.
Strawberries, peaches, apples,
heirlooms, Asian pears and berries
are the leading fruits that draw
premiums in the fruit category,
and heirloom varieties, organics,
peppers, specialty pumpkins and
tomatoes lead vegetable premiums.
On fruit, a slim majority of
respondents (52%) add 20%, 18%
stated they mark up 30%, and 16%
add 10%. For vegetables, 47% charge
20% with under a third affixing 10%.
In responding to how farm
marketers communicate " premium "
to customers, under 30% each
stated " variety type " and " limited
availability/high demand " while 34%
chose " specialty/niche crop. "
On how farm markets set prices,
comments included
* " Consumers. "
* " What we feel the market in
our area will bear. "
* " Purely marketing. "
* " What customers will pay. IF
they don't buy, it isn't sold at all. "
* " Agriculture chemicals and
fertilizer. "
* " Marketplace determines
the price. "
* " We monitor sales volume
after price increases to
estimate demand. "
The comment " Sell for a loss
versus a 'goose egg' " drew Moyer's
attention. He recommended farm
markets consider bundling lowerdemand
commodities with other,
more profitable items to gain some
profit. If the farm has a communitysupported
agriculture (CSA)
program, the farm market could
move the item through the CSA.
" Set prices based on the perceived
value by customers, " Moyer said.
" Clearly communicate the value
proposition to customers through
signage, conversations and
marketing materials. "
Supermarket influence
In gauging grocery store influence,
40% said they compare store prices.
Grocery stores base pricing and
profitability on many factors, with
seasonal produce items often sold as
" loss leaders " to attract customers,
Moyer said.
" Some of the most successful
markets I know have no idea what
VEGETABLEGROWERSNEWS.COM | 13
The survey results noted
that 24% of markets offer
organic fruit and vegetables.
Photo by Doug Ohlemeier.
http://www.VEGETABLEGROWERSNEWS.COM
May/June 2024

Table of Contents for the Digital Edition of May/June 2024
