Which type of limited-service wholesaler is owned by farmers who assemble farm produce to sell in local markets?

Most of the food production in developed countries is produced with conventional, non-organic production methods and takes place on large, specialised farms selling through mainstream supermarket chains. The main advantage of these production, marketing and distribution methods is that they bring down costs, and thereby consumer prices. However, this food system, which we will term mainstream conventional, also has drawbacks. Conventional food is often based on monoculture production, and use of chemical fertilisers and pesticides can have adverse effects on the environment and the health of producers as well as consumers (Reganold and Wachter, 2016). As a response to this, certification of food produced without chemical inputs has been developed by organic labelling organisations, making it possible for consumers concerned with food safety and environmental issues to select organically labelled products. Furthermore, it has been claimed that in globalised, mainstream food systems competition forces farmers to continuously lower their costs and make new investments to benefit from new technologies and economies of scale, resulting in structurally decreasing economic margins (Renting et al., 2003; van der Ploeg et al., 2019; Forbord and Vik 2017, Bjørhaug et al., 2017). There is a view of the agricultural sector as being dominated by large, industrialised farms and multinational corporations, and where small scale farmers are put under economic pressure as a large part of the final price paid by consumers goes to retail and other levels of the value chain (Kneafsey et al., 2013; Marsden and Smith, 2005). According to McMichael (2012) this is a “corporate food regime” where agricultural products are solely valued as commodities, and crops go from being food to becoming exchange-value. But in contrast to this agro-industrialisation where there is “food from nowhere”, there is a place-based form of agro-ecology, where there is “food from somewhere” (McMichael 2012). In other words, there are sales channels that can be seen as alternatives to the mainstream food systems, as they provide opportunities for consumers to purchase from and pay directly to the farmers who produce the food they eat. With these sales channels consumers can also get in closer contact with the farmers and know more about how production takes place, including how sustainably managed it is in terms of social and environmental aspects (Cleveland et al., 2014; Kirwan, 2004). This type of marketing is variably termed local or direct marketing (Low and Vogel 2011; Silva et al., 2015; Seyfang 2006), short supply chain marketing (Renting et al., 2003), alternative marketing channels (Hardesty and Leff, 2010; LeRoux et al., 2010) and alternative food networks (Renting et al., 2003), but they all refer to the same phenomenon: Selling farm products outside of the mainstream marketing channels, meaning large wholesalers and supermarkets (Bos and Owen, 2016; Kerton and Sinclair, 2010). Here we have chosen to mainly use the term “local marketing” since this is a term which captures both a geographical closeness, and a direct link between producers and consumers, bypassing the anonymity of the global food system (Woods, 2020).

As a very rough simplification we can contend that food in most developed countries can be divided into different categories according to how it is produced and sold: It can be produced as either organically certified or conventional, and it can be sold either locally or mainstream. In Fig. 1 we have drawn circles representing these categories, where mainstream and conventional are merged into one category, describing food which is produced as conventional, non-certified, and sold as mainstream through supermarket chains. As this is where the main share of the food production and sales takes place, the circle is bigger than the others (but not proportionate with the reality). The purpose of the figure is to illustrate where these categories overlap with each other and where they do not: Food which is organically certified can be sold either mainstream or locally, and food which is sold locally can be produced as either organically certified or conventional.

To some extent food which is sold locally have some of the same credence attributes as organic food. Local and organic food both appeal to consumers concerned with sustainability and quality (Seyfang, 2006), but there are some substantial differences (Goodwin-Hawkins et al., 2020; Lobley et al., 2009a). While organic production must meet the requirements for organic certification, there is no third-party certification of local food in the same way. It is the way it is sold which defines local food, not the way it is produced (Low et al., 2015). While consumer preferences for organic food may rise from a concern about chemical pesticide residues and pollution, local food consumers may be more concerned with reducing food miles and supporting local communities and small farms (Low et al., 2015; Migliore, 2015). But previous studies have also found that some motivating factors, such as quality, are the same for consumers of both organic and local food: the organic production methods are believed to give a higher quality of the product, as is the shorter delivery time for local food, which gives more freshness to the products (Kim et al., 2014; Moser et al., 2011).

In horticulture, being an organic producer implies primarily to abstain from using chemical input factors. This could lower productivity and increase the risk of crop losses, especially for growers with insufficient agronomic knowledge on alternative methods to prevent for instance crop pest. In addition, organic production generally requires more employment of people than conventional (Lobley et al., 2009a). These factors increase costs of production, for which higher consumer prices can compensate, but these premium markets are smaller due to low demand. Hence, organic horticulture presents a different set of risks compared to conventional production.

The early organic movement was to a larger extent associated with small farms, community support and marketing through local food sales channels, which means that the link between the two concepts, local and organic, was strong (Adams and Salois, 2010; Obach, 2015; Reed, 2010). In 2007 still nearly half of the organic fruits and vegetables in the US were sold in local or regional marketing channels (Greene et al., 2009), but organic food is today to a large extent produced on large farms recruited from conventional agriculture, selling through mainstream wholesalers and retailers. It has been claimed that there has been a “conventionalisation” of organic agriculture and a creation of an “organic lite” category, with less positive impact on social and environmental sustainability (Guthman, 2004).

Which marketing opportunities a farmer has for his or her produce is limited by who is willing to purchase within a certain radius, and what their purchasing criteria are. Examples of different purchasers are producer owned marketing cooperatives, supermarkets, exporting companies and local schools or restaurants wanting to source locally. Often local sales opportunities are the result of consumer-led movements or public policies (Wood, 2020; Lever et al., 2019). Hence, there are structural constraints which determine not only which marketing options farmers may choose from, but also which farm characteristics are most suitable for the different sales channels. In mainstream, modern agri-food systems the pressure to provide low prices increases the necessity for economies of scale, which can exclude small-scale farmers (Richards et al., 2013). Furthermore, farms located in the hinterlands or that are focused on large-scale production have less opportunity to sell into local markets and are therefore more likely to sell to large wholesalers, food processors and retailers (Woods, 2020; Monson et al., 2008). Monson et al. (2008) also find that farms with high value products more often use local marketing.

Previous studies have found that there are different advantages and drawbacks for farmers who sell through mainstream and local sales channels. According to Kim et al. (2014) the attractiveness of selling to a mainstream wholesaler are lower marketing costs, transparent pricing, and less risk overall. In another study (Hardesty and Leff, 2010) found that marketing costs were lower with sales through a wholesaler. On the other hand, LeRoux et al. (2010) found that sales through wholesalers typically will increase the labour costs, as more time is required for field sorting and bunching of products than with other types of marketing. In their research, based on case-studies, they compare the profitability of different types of sales channels and found that selling through CSA and Farmers Markets gave a higher net sales income than selling through a wholesaler.

Studies have also found that mainstream marketing, which is based on industrial coordination, does not give economic rewards for quality aspects which are hard to measure on the products (Verhaegen and Van Huylenbroeck, 2001). One of the advantages of local marketing is the possibility to achieve premiums for freshness or high value or speciality crops (Kim et al., 2014). The higher turnover costs of local marketing can be compensated for by higher prices and reduced insecurity, and the possibilities to get a better price for products that large wholesalers will classify as second class (Verhaegen and Van Huylenbroeck, 2001). The various sales channels also each have their specific advantages: Selling at farmers' markets is a way of broadening the network and getting access to other marketing channels, while CSA, once established, gives a regular income without requiring continued efforts in marketing (Hardesty and Leff, 2010). A Norwegian study also found that an advantage with farmers' markets is the direct contact with consumers, so that producers can test out new products and get more knowledge of consumers’ preferences (Veidal and Flaten, 2011).

Although the likelihood of a farmer selling mainstream or local is affected by structural constraints, the personal characteristics of the farmer may also influence which type of farm she or he chooses to purchase or build up, and which marketing channel is chosen. Low and Vogel (2011) found that local marketing farmers on average are older, but with a higher level of education than mainstream marketing farmers. Monson et al. (2008) hypothesised that the reason why local marketing farmers have a higher level of education is because of the tendency of educated people to “get back to the land” as hobby farmers, selling through local marketing. But with their logit estimation they do not detect any association between education level and form of marketing. They also did not find any statistically significant effect of age.

Selling through different sales channels may also have different impacts on feelings of satisfaction. A study from Wisconsin found that producers selling through farmers’ markets and CSA were more dissatisfied with their profitability than producers selling to wholesalers and restaurants, but they were more satisfied with their quality of life (Silva et al., 2015).

Productivity challenges due to cold and unstable climate and short seasons, as well as high labour wages, make agricultural production costs in Norway high (Flaten et al., 2011). However, food self-sufficiency is highly valued by Norwegian citizens (Mittenzwei et al., 2016), and the agricultural sector is protected by both import tariffs and high subsidy levels (Almås and Gjerdåker, 2004; Kvakkestad et al., 2018). Possibilities for import protection are strengthened as the country is not part of the European Union. It is estimated that the country supplies itself with approximately 42 % of the food consumed (NIBIO, 2020). Rural employment in remote areas has been another political aim in Norway, and owing to a subsidy system prioritising peripheral farming, farm sizes are smaller in Norway than in the EU and neighbouring Scandinavian countries. In 2013 only 1,5 % of the farms in Norway had more than 100 ha, compared to the EU average of 7 % and the average of Sweden, Denmark, and Finland of 14 % (Eurostat, 2013).

Norwegian consumers generally have a strong level of trust in Norwegian agricultural producers, and many prefer food products from Norway (Roos et al., 2016). Higher priced local or regional speciality food has over the years become increasingly important (Gustavsen and Hegnes, 2020). But price consciousness amongst consumers is also prevalent, manifested for instance by the fact that many Norwegians regularly take long car trips across the border to Sweden to buy cheaper food stuff (Bazzani et al., 2018).

In 2020 the organic area in Norway was 4,2 % of the total agricultural area (SSB, 2021). The organic share of total food supply is lower in Norway than in the neighbouring countries of Sweden and Denmark (Willer and Lernoud, 2019). The reason for this is not known, but a possible explanation could be that Norwegian consumers in general have a high level of trust in domestic agricultural producers and their compliance with food safety and animal welfare requirements (Storstad and Bjørkhaug, 2003). A more recent study by Kvakkestad et al. (2018) found that low preference for organic food can be explained by a lack of perceived superiority regarding its taste, health benefits, safety and environmental impact.

As in many other countries in Europe, the retail market in Norway is dominated by a few large supermarket chains. But in Norway also the wholesale market for most food sectors can be characterised as oligopolies or duopolies, often with large producer run marketing cooperatives taking the role as both wholesalers and processors (Richards et al., 2012). For fruit and vegetable producers, mainstream marketing implies being a member of one of the two large producer organisations (Gartnerhallen and Nordgrønt), who in turn sell to one of the two main wholesalers in Norway: BAMA and COOP, the latter being also a supermarket chain. The mainstream fruit and vegetable market in the country is strongly dominated by these two supply chains, which cater for 96 % of the grocery market in Norway (Wifstad et al., 2018). In these chains the quantities the producers deliver each year is regulated through agreements made in the autumn between producer organisations and wholesalers. Regulating supply to avoid overproduction has important benefits, as high production costs levels makes profitable export of any surplus products difficult. The agreements are non-binding, but although there are sometimes deviations from both sides, most of the time both parties comply: the producers deliver as much as agreed upon, and the wholesalers buy it (Milford et al., 2016). This “regulation” of the market means that producer members cannot decide themselves the quantity they want to sell through their organisation. Furthermore, as already existing members have priority, new members are only accepted when there is market demand for products that already existing members cannot provide. Organic fruits and vegetables are sold through the same channels as the conventional, whether it is mainstream or local. Fruit and vegetable producers can sometimes get access to a higher quota for organic deliveries than what they can for conventional, which means that organic certification can be an advantage. But there is also a risk of not being able to sell this at a higher organic price if consumer demand fails (Milford, 2014).

The plan for the study was to first get an overview of the situation for organic horticultural producers and their marketing options, by interviewing stakeholders working in the fields of organic production and marketing. The next step was to gain knowledge on local marketing and how it functions, by interviewing actors in the local marketing sector. From this we moved on to interviewing producers about their experience with local and mainstream marketing. Finally, we developed a questionnaire

Of those who answered the survey, 22 % sold half or more of their product through mainstream marketing, meaning through the two large producer organisations and the two main wholesalers in Norway. Marketing outside the mainstream supply chains involves many different options. Fig. 2 shows the survey results regarding where the farmers sell their fruits and vegetables. The respondents could give multiple answers, and many have replied “directly to consumers” in addition to other answers. The

With the data from our own survey and from the Norwegian Agricultural Agency we performed statistical analyses to see whether the quantitative data are consistent with our qualitative analysis. Three different analytical tools were used to identify significant differences between factors and characteristics of farmers selling 50 % or more through mainstream marketing, and those selling 50 % or more sold through local marketing. The variables are described in Table 1, which also gives summary

There are significant differences between farms selling into mainstream supermarkets and selling through local sales channels. Local marketing farms are in general smaller, and they have a more diversified production, which includes more variation in crops and a higher likelihood of having livestock and of doing food processing on the farm. The main explanation for these differences are the structural constraints imposed by the two food systems, such as the requirements of the mainstream

What can be derived from this research is that mainstream and local sales channels complement each other, creating opportunities for different types of farmers and reaching different consumer segments. Policy measures to promote production and sales of organic fruits and vegetables should therefore focus on both these channels. Factors that could be considered in mainstream marketing are for instance the aesthetic requirements for uniform quality, which are more difficult to fulfil with organic

Anna Birgitte Milford: Conceptualisation, Methodology, Investigation, Formal analysis, Writing, Gudbrand Lien: Methodology, Formal analysis, Validation Matthew Reed: Writing-Review and Editing.

The authors declare to have no conflict of interest.

This research has been funded by the Norwegian Ministry of Food and Agriculture and the Norwegian Research Council (grant number 294604). The sponsor has only provided financial support to the research. We would like to thank Brian Hardaker for valuable comments.