Presentation used during the workshop "Reinventing Food Distribution for Regional Food Systems" by the organization Red Tomato

1. The Dignity Deal:
Creating Profitable, Wholesale Distribution
Networks for Mid-Sized Farmers
Community Food Security Coalition Conference
Sunday, October 17, 2010
Betty MacKenzie, Co-director, Red Tomato

2. The Dignity Deal
Creating Profitable, Wholesale Distribution Networks for Mid-Size Farmers
I. Introductions/Context/Getting started (15 min)
• Introduction
• The Handouts
• About Red Tomato & Some Basics
• About Eco Apples
II. Typical Distribution, Deals & Effects (15 min)
• Picture of Distribution
• Characteristics of a Typical Deal & the Undignified Results
• Losing the Middle & Strategies for the Middle
III. Product Differentiation and Dignity pricing (15 min)
• How We Differentiate our Growers & Products
IV. Aggregation & Consolidation (5 min)
• Making the Order Happen for the Customer
IV. The Dignity Deal and the Challenge of Scaling Up (15 min)
• the Dignity Deal Basics
• Characteristics of the Dignity Deal
• Ways it does Not Work & Ways it does Work
• Goal is Grower Satisfaction
Q&A throughout─please interrupt

3. Red Tomato Basics
 business fundamentals—for everyone
--right product, right price, on-time, paperwork, insurance,
good communication with customer, etc.
 product differentiation
 packaging
 unique logistics
 ─transportation: grower, partner, hired
 ─consolidation – usually at one grower facility
 ─product cluster design for gaps and longevity
 risk management/shared risk
 feedback loops
 Dignity Deals

4. The Eco Apple Story

5. Lyman Orchards
Middlefield, CT

6. Scott Farm
Dummerston, VT

7. Sunrise Orchard
Cornwall, VT

8. Alyson’s Orchard
Walpole, NH
RT Co-director, Michael Rozyne, and farm manager, Homer Dunn

9.  Picture of distribution
 Characteristics of typical deals
 Effect on midsize farms
 Strategies for “the middle”
II. Typical Distribution, Deals &
Effects on the Market

10. A Picture of Distribution
 Dramatic, steady
loss of farms in the
middle, with
wholesale capacity
 Picture the middle of
the distribution
system as the
BOTTLENECK of an
hourglass. Control
lies at the
bottleneck.

11. Characteristics of Typical Industry Deal
 Risk shared disproportionately
 Remainder pricing; growers takes what’s left
 No feedback loops between consumer/farmer; none
or few between buyer/farmer (Silence = all is well?)
 Externalities (pollution, public health, farm workers,
etc.) not part of the conversation; not reflected in the
cost
 Large distance between grower and consumer (in
space and time)
 Farmer is not at the table for strategy and price
making

12. The Undignified Result of Typical Deals
 Price becomes driver Unreal costs
 Lower product quality
 Ignorance, mistrust
 Lacking control at the bottleneck
 Resulting in farm loss

13. We’re Losing the Mid-Sized Farms
Value-
Added
Commodity
Very
Small
Very
Large
1. Direct
Sellers
2. Cooperative
Sellers
3.Low Margin/
High Volume4. TROUBLE
ZONE !!!
Farmers’ Markets
CSA’s
Internet Sales
Strategic Alliances
&
Food Value Chains
Mid-sized Farms
Wholesale
Commodities
Large-scale
commodity
Producers
Steve Stevenson
Ag of the Middle

14. Strategies for Farmers
in “The Middle”
Value-
Added
Commodity
Very
Small
Very
Large
1. Specialty –
Direct Sales
2. OPPORTUNITY
3. Large-scale
Deals
4. TROUBLE
ZONE
Mid-scale
Commodity
Producers
 Differentiate with Value-added Attributes
 Aggregate for necessary volume
 New kinds of business rules
 A Need for Dignity Deals
Steve Stevenson
Ag of the Middle

15.  Farm Identity
 Intrinsic Products
 Packaging
 Advanced IPM (Integrated Pest
Management)
 Fair Trade
 Branding & Storytelling
 Grower Differentiation
III. Product Differentiation

16. We Differentiate Growers and Products
(decommodify)
Examples of
“decommodified”
Red Tomato products

17. Locally-grown: farm identity preservation
(Farm name and location at bottom of package)

18. Creating intrinsic product:
packaging, pack, grade, variety

19. Packaging
Heirloom Baskets
Heirloom Boxette

20. Ecologically-grown: organic and advanced IPM

21. Picking apples at
Truncali Orchard,
Marlboro, NY
Fair Trade: worker and farmer well-being

22. Brand and Storytelling

23. Grower Differentiation

24. IV. Aggregation and Consolidation

25. Kiwi Corners
Danville, PA
4 pallets kiwis
624 cases
WFM/NoA
Cheshire, CT
Scott Farm
Dummerston, VT
5 pallets heirloom
apples 150 cases
Black River Produce
N. Springfield, VT
Lyman Orchards
Middlefield, CT
4 pallets apples, 120 cases
Blue Hill Orchards
Wallingford, CT
5 pallets apples, 150 cases
Mother Earth Mushroom
W Grove, PA
$0
64¢
3
palletskiwi
1
palletkiwi
32¢
To: WFM/Texas
Arrives on Monday
$3.40
14 pallets apples
1 pallet kiwis
$1.25
Monday
Tuesday
Wednesday
Friday
Red Tomato Grower
Customer
Trucking Partner
$0
Eco Apple Logistics
Making an Order Happen for the Customer
(costs are for each leg of the trip)

26.  The Dignity Deal Basics
 Characteristics of the
Dignity Deal
 Packaging
 Advanced IPM
 Fair Trade
 Branding & Storytelling
 Grower Differentiation
V. The Dignity Deal - the
Challenge of Scaling Up

27. The Dignity Deal Basics
Not a formula, rather a process—our way of doing business
 Based on values
- Fairness, Transparency, Shared risks and rewards,
Triple bottom line accountability, (Economics, Social,
Ecological)
 Baseline
- Striving for freshness and flavor through commitment to
continuous improvement
 Origins of dignity pricing
- Began with costs of production + reinvestment and
fair/limited profit
- Unrealistic. Developed the Dignity Price

28. Characteristics of the Dignity Deal
 Risk sharing
- Buyer commitment
- Advance planning
 Dignity pricing
- Farmer is at the table
for strategy and price
making
 Externalities
- Part of the conversation
 Close the distance
between grower and
consumer—mental and
spacial
 Farm identity preserved
 Feedback loops
- Constant communication
- Continuous improvement

29. Some Ways It Doesn’t Work
 “I have not failed. I've just found 10,000 ways
that won't work.” Thomas Edison
 change in personnel & relationship loss
 sudden death—not seeing the whole WHOLE
 every detail counts—a packaging design
problem
 your stories?

30. When it doesn’t work

31. Some ways it does
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
2004 2005 2006 2007 2008 2009
Cases
Eco Apple Case Sales 2004-2009

32. Some more ways it does
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
2005 2006 2007 2008 2009
dollars
Eco Apple dollars and acres 2005-2009
0
100
200
300
400
500
600
700
800
900
2005 2006 2007 2008 2009
acres

33. Grower Satisfaction
Barney and Chris Hodges
Sunrise Orchard – Cornwall, VT
“…As a grower, Red Tomato has great value to my business... we
have become better growers, which is exactly what we need…”
---Barney Hodges

34. Thank you
For more information, please visit:
www.redtomato.org/resources.php
Slideshow created by Tim Huggins and RT Staff