“Choosing a customer to add value” 

Profit can be improved by careful choice of customer – and ensuring that customer requirements in terms of service and quality are met. 

This article focuses on how to add value when selling to the processor/packer. The comments may also be relevant to the stores farmer who can improve profit by providing what the finishing farmer looks for in the stock he purchases. 

Much of what follows is unlikely to be new to farmers. What might be different and merit thought is whether adopting the structured approach suggested throws out new ways of working with existing customers, or prompts a decision to change customer. 

The first step is to list all the customers that it is possible to sell to, and gather information about them. Information can be found from company websites, company brochures, industry bodies, shows, suppliers, other farmers, by attending the meetings that customers hold, and most importantly, by talking to customers. 

Information should be gathered about the customer’s business performance, their relationships with farmers, the schemes which they run, and what they want from their farmer suppliers. 

Questions to be asked about business performance are : 

·        Does the customer have a clear strategy for the future, one which sets out how it will do better than its competitors in the market place?

·        Is the customer growing its turnover and profits and is it selling products which are in tune with consumer trends?

·         Does the customer supply a company which growing and successful?

 Answers to these questions will indicate whether the farmer’s customer is likely to grow in the future, and also what sort of profit pressures it is likely to face. Such information helps the farmer decide whether they are dealing with a successful, and forward thinking company. 

Questions to be asked about customer relationships with farmers include: 

·        Is the customer imaginative in the type of schemes it runs.

·        Does it have good communication links with its farmers with regular feed back on market place trends and opportunities.  

Such information provides clues about whether the customer is likely to help the farmer identify future trends, and work with him to provide profitable products to fit them.  There is a move towards local customer relationships. It is partly a response to general public interest in local foods, but with high fuel prices it makes sense to minimise transport costs, and it is easier to build good customer relationships with someone close by. 

Information should be gathered about specific schemes run by customers. Schemes operate in every sector, and are not always dependent on being a big producer. 

For example, in red meat, some customers pay extra for specific breeds, for regional brands, for organic, and for livestock processed for products sold at a premium in the shops. Other red meat customers guarantee a forward price. Such an approach is becoming more popular with the UK’s largest supermarket recently announcing a commitment to forward price contracts on beef.   

Arable customers operate premium schemes, for example in milling wheat, and naked oats, and predict that such contracts will grow in number and extend to crops such as malting barley. Forward price contracts have operated in the arable sector for many years.  

The milk sector also operates schemes which pay above a base price. There are direct supply schemes, schemes where a farmer’s production is dedicated to specific supermarkets, schemes which pay extra for milk composition , and payment for delivering the same quantity of milk each month.  

In return for the premiums or price guarantees paid for schemes,  the farmer is required to meet certain conditions. These are designed to help improve the customer’s profits, and are often set by the buyer’s own customer. Regardless of sector, customers require the same thing from farmers – quality and commitment. Depending on the sector, the requirements might well be quality, continuity of supply, consistency, traceability, and maybe product composition. 

The key point is that not all customers are the same. Regular analysis of the options available can highlight new opportunities to improve profits. New openings can emerge, and new schemes, new products, and new ways of working with customers are constantly being developed. Decisions about whether they are right for you are easier to take against a background of knowledge.