Mastering Marketing
Farm to Hospital-Selling Farm-Raised Meats and Poultry in Maryland
The Time is Right
Selling locally grown farm meats and poultry to hospitals can be both challenging and rewarding. The hospital food service industry reached $34 billion in 2010, according to Market Research.com Trends in U.S. Hospital, Nursing Home, and Residential Facility Foodservice. In May 2011, Michigan launched a ground‐breaking statewide healthy food initiative that requires hospitals to commit to purchasing at least 20 percent Michigan‐ grown, produced, and processed foods.
The Maryland Hospitals for a Healthy Environment (MD H2E) initiative has been highly successful and a model state program that has brought a range of sustainability efforts to Maryland hospitals. A significant component of this overall effort has been their Healthy Food in Health Care initiative, including the Local Foods to Local Hospitals project. The project’s early emphasis was on integrating more locally, sustainably grown fruits and vegetables into hospital cafeterias and patient meals. Currently, over one‐third of the hospitals in Maryland regularly purchase local food from their distributor or direct from a local farmer. These foods have primarily been fruits and vegetables.
More recently, this project seeks to increase the market for producers in Maryland and the Mid‐Atlantic region of sustainably produced protein foods such as meats and poultry through increased purchases of these products by area health care facilities. This expanding market can provide an important and consistent market for producers of not only fruits and vegetables, but also meats and poultry products. It gives producers an opportunity to sell larger volumes of products directly to a hospital or a distributor who provides products to institutions. Volume sales can lower labor, marketing, and distribution costs.
The time is right for farmers to connect to hospitals so they can provide staff and patients with healthy, fresh, and great-tasting foods. The focus of this publication is to assist livestock and poultry producers in developing products and marketing tools to increase meat and poultry sales directly to hospitals and extended care facilities or to distributors who handle hospital food purchasing accounts.
Hospital Purchasing Procedures
There are basically two different types of hospital food service. This can also be said of most institutional purchasing dynamics of schools, universities, or prisons. Hospitals that operate their own food services in-house are called “self-operated.” Self-operated hospitals typically have food service managers that have independent authority over food purchasing. Hospitals that contract with an outside company to manage their foodservice are commonly referred to as “privately managed.” Privately managed services are often operated by large corporations such as Premier and Sysco and client hospitals are often bound to multi-year national food buying contracts.
It is often easier for farmers to establish a relationship with the self-operated facility. However, more privately managed foodservice operators are making local food purchases or asking their distributors to at least source locally produced foods. Whether self-managed or privately managed, most foodservice operators prefer working with a limited number of vendors to save time and reduce administrative costs. They establish “primary vendor” contracts for certain items from a single vendor. These contracts can be for one or more years. However, most contracts allow for limited “off contract” purchases. When approaching a prospective hospital food service manager client, the seller needs to determine that hospital’s degree of flexibility for “off contract” purchases.
What Maryland Farmers Need to Address before Approaching Hospitals about Purchasing Local, Sustainably Raised Meats and Poultry
Step 1: Production Standards
The Maryland Hospitals for a Healthy Environment (MD H2E) initiative to expand locally, and sustainably raised meat and poultry sales to hospitals requires producers to adhere to sustainable production practices. These include stipulations such as no hormones implanted or injected into the animals, no added antibiotics in their feeds, non-medicated and arsenic-free feeds for poultry, and the preference for grass-based or free-range farm management systems.
Step 2: Regulations and Food Safety
Hospitals want certifications and regulatory assurance for food safety and quality. Having meats processed in a USDA processing facility is required for sales of beef, pork, lamb, and bison. Poultry must be processed under a Maryland State certification for on-farm poultry processing or a USDA stamp. Foodservice managers will expect farmers to have Standard Operating Procedures, HACCP Plans in place where required, and documentation of required licensing and permits. Many hospitals will require producers to hold at least $1 million of general product liability insurance and possibly as much as $5 million in coverage.
Step 3: Product Consistency and Delivery
Spend some time getting to know what’s expected from the hospital in terms of quantity and quality of products. Be clear about the products and quantities you estimate you will have available and when. You may need to work with other producers to fill gaps in production times or offer a greater variety of cuts. If volume or quality is going to be significantly different than what was previously agreed upon, let the food service manager know as soon as possible. Few hospitals have the capacity to pick up products at the farms so work out a delivery schedule in advance. If a hospital is receiving deliveries through a distributor, explore the possibility of working through these channels. If your processor is already making bulk meat and poultry deliveries to restaurants or grocery stores, they may be able to deliver your product to a hospital for you. Good customer service is critical to landing and retaining a hospital food service account.
Step 4: Pricing
Give your customer a price that reflects your cost of production plus your desired profit. Remember that hospitals have a per plate cost target, but often try to make adjustments so they can pay a little more for a sustainably produced protein. Hospital accounts should be considered as direct wholesale outlets, so it is unrealistic to expect the same per pound price as selling direct to customers at a farmers’ market might command. Remember these are volume accounts that save you labor costs and allow for volume sales. Hospitals and other institutions seldom pay for products upon delivery. It may be as long as 30 to 90 days before invoices are paid.
Making the Connection-The Initial Visit
Connecting with the hospital food service manager requires calling and making an appointment - do not just “drop by.” These are busy people and you want their full attention when meeting with them and trying to connect with them as customers.
Spend some time getting ready for the visit. Really knowing and understanding your product is the first step in determining your marketing strategies. Your ability to describe what products you sell, what they do, and what makes them unique or special will result in greater marketing success.
If you haven’t done so already, get your promotional materials in order. Promotional materials come in all shapes and sizes - the designs are endless. However, there are three things to remember:
- Make sure the piece reflects the tastes of your target audience.
- Keep it simple.
- The quality of your printed materials reflects directly on the perceived quality of your products.
Your brochure should tell your “story.” What is your product, how do you produce it, where and why should customers purchase it, all your contact information, including your email address and website URL. The most cost-effective size is an 8 ½ x 11-inch sheet that can be folded and mailed in a #10 business size envelope or a trifold brochure. Have your price list printed separately instead of in the brochure since the pricing can often change. Make sure the graphics fit your operation. A picture of endless miles of Montana range with cattle grazing is not a good representation of grass-fed cattle from this region.
Get a good picture of you, your family, and your farming operation is taken for use in printed materials and for your website. Dress in clean work clothes and pay attention to what’s in the background. Try to get pictures taken when the grass is green and growing or when Mother Nature’s in her glory.
Use recycled paper and soy ink when you print and have the printing company include the appropriate recycled symbol in the bottom corner. Customers that purchase grass-fed meats also want to know you’re environmentally sensitive too.
Plan to take two sets of samples along to your visit and leave them there without charge. The best way to sell food products is to allow potential customers to see, feel, and taste your product.
In addition to meeting the food service director and providing them with samples and purchasing information, you should try to gather some other critical information about each hospital during your visit.
- Is the hospital food service self-operated or privately managed?
- What flexibility does it have to make purchases off contract?
- What are the requirements for becoming an approved vendor with the hospital?
- How are orders placed and deliveries scheduled?
- What are the hospital’s invoicing procedures?
- What types of meats or poultry would they be interested in purchasing and in what quantities?
- What is the ordering cycle?
Having a better understanding of a hospital’s purchasing dynamics helps the meat or poultry producer provide a better purchasing experience.
Summary
The time is right for farmers and hospitals to connect and provide staff and patients with healthy, fresh, and great-tasting foods. Meat and poultry producers need to research the purchasing dynamics of each hospital they want to approach and schedule an appointment with the food service manager to evaluate the market potential there.
Benefits of Selling to Hospitals and Extended Care Facilities
- May offer a direct wholesale price.
- The opportunity to move a larger volume of products saves labor and marketing costs.
- Hospitals may decide to support other events that support local farms such as hosting a farmers’ market or provide space for a CSA pick-up site.
- Provide a year-round market and consistent order volumes.
Challenges of Selling to Hospitals and Extended Care Facilities
- The farm may be required to carry additional liability insurance, certifications, and regulated permits.
- May be hard to make initial contact with the buyer.
- May be required to sell through contract distributors.
- Product specifications may be difficult to meet.
- May have specific delivery and invoicing requirements.
Other Educational Resources
The University of Maryland Extension conducts seminars, workshops, and courses on a wide variety of agricultural topics including animal and crop production, marketing, and business planning. Contact your county agent for a schedule of events or to be put on a mailing list for newsletters, and event announcements. The University of Maryland Extension also publishes fact sheets and bulletins on agricultural topics, most of which can be found on the internet.