Dairy farmers have faced many years of low milk prices over the last decade or so. As a result, many have sought to diversify their businesses to supplement the milk check that arrives in their mailbox from their co-op or processor. All over the country an increasing number of dairy farmers have begun to make finished dairy products like cheese, yogurt, ice cream, butter, bottled fluid milk, or even soaps and lotions at on-farm processing facilities. Dairy farms that engage in the production of these types of value-added products, are often referred to as “producer-processors.” There are many business models that these farms are structured around involving the production of a wide variety of products and outlets for making sales. If you are a dairy farmer looking to capture more of the consumer’s dollar through the production of value-added products, then you will eventually need to consider whether grocery stores will be part of the portfolio of customers you sell to. The world of grocery retail has a particular set of rules. To cultivate grocery as a major outlet for sales, you’ll need to become familiar with what retailers will require before they allow your products to be sold on their shelves.
Requirements to Sell to Grocery Stores
Before reaching out to possible customers, you’ll need to make sure your business and your products meet the basic requirements for selling to a grocery store. Major retailers will require that the dairy products that they buy have a UPC (a scannable barcode). The UPC is important to grocery stores because it helps to expedite the checkout process. Rather than entering a product code in by hand, the UPC allows the cashier to quickly scan products and automatically total up a purchase and keep track of the store’s total sales by product type. The UPC may also be used during receiving to scan delivered products into inventory. If you are in need of UPCs for your products, they can be purchased online from the non-profit GS1 US at the following address: https://www.gs1us.org/upcs-barcodes-prefixes/get-a-barcode.
On an even more basic level, your product will need to be appropriately labeled in accordance with state and federal law. For dairy this includes, but is not limited to, having a display telling customers what the product is (e.g. skim milk, cheddar cheese, Greek yogurt etc.), net weight or quantity, ingredient list, allergens, business name/address, plant number, and nutritional facts. Check with your state department of agriculture for the specific information that needs to be included on a product label in order for it to be approved. You can find the regulatory personnel that deal with dairy for every state at this web address: https://www.fda.gov/food/federalstate-food-programs/milk-safety-programs-contacts-state-grade-milk-sanitation-personnel
You will also need to develop food nutrition panels for your products. These must adhere to the FDA standards for labeling which can be found here https://www.fda.gov/regulatory-information/search-fda-guidance-documents/guidance-industry-food-labeling-guide. Nutrition panels can often be developed by contacting the food science department at your local Land Grant university. In Tennessee you can contact the state Food Safety Extension Specialist Dr. Mark Morgan for assistance. Dr. Morgan can be reached by email at mark.morgan@tennessee.edu. More information about UT Food Science Extension is available here https://foodscience.tennessee.edu/food-science-extension/. When submitting a sample for nutrition information testing you will fill out this form https://foodscience.tennessee.edu/wp-content/uploads/sites/52/2021/05/Final_Sample-Submission-Form-three_products_May_24_2021.pdf. The form must be accompanied with a sample of the product that is at least 4oz.
Additional requirements that grocery stores require before you are able to sell in their stores will vary depending on the business you are working with. All grocery stores will require you to carry a significant amount of liability insurance to protect against expenses from injuries, property damage, or lawsuits that happen as a result of your business activities. The minimum amount of insurance that you will be required to carry may range from $4-6MM depending on the customer. As part of the process for becoming an approved vendor you will need to provide a certificate of insurance to the store that they can keep on file. You will likely also be required to provide a sample invoice. Sometimes farmers who are new to selling to grocery stores expect that providing a handwritten invoice will be allowed. This is often not the case. To begin selling to grocery stores you may need to upgrade the system you use to keep track of your sales. Another common requirement for selling to grocery stores could include submitting to a third-party audit of your plant to ensure that you are meeting minimum quality control and food safety standards. You may also be required to upload your product list to a database such as RangeMe or fill out and submit product information sheets that retailers will use to catalogue and keep track of your products attributes including size, weight, price, etc.
Making sure you are ready to meet the basic requirements that groceries will require of you to become an approved vendor and start selling on their shelves is an important first step in getting ready to start contacting customer prospects. When you go out and sell your product it is important to present yourself and your business as professional and capable of meeting the needs of the customer. It would be very unfortunate to miss out on business because you don’t have a UPC code or enough liability insurance, so make sure you have everything in order before you start talking to potential grocery customers.