The right mix of customer accounts, of course, will be different for every type of business.
The ideal portfolio for a grower that specialize in one or commodities is not the same as a grower that produces a wide variety of fruits, herbs, vegetables, and processed products.
“For me to decide to onboard a customer,” says Mark Hayes, president of Twin Garden Sales, Inc., BB #:119080 in Harvard, IL, “I consider its volume opportunities, year-round commitment, if possible, and credit rating in the Blue Book.”
Finetuning a mix
Twin Garden Sales specializes in primarily sweet corn and over the years has built a beneficial customer mix: very large clients who buy in mass quantity and enjoy volume priority during holidays and when product is short; and medium-sized customers that may buy a lesser amount of sweet corn, but do so consistently or during seasonal timeframes.
Key “We have intentionally geared [the company toward] a blend of customers that would be considered large, medium, and small,” says Hayes.
“Electronic Data Interchange (EDI) and similar avenues make quoting easy. With large volumes and commitment levels from our anchor customers, this bodes well for our customer ratio. These particular customers tend to be loyal and predictive, which is a great benefit.”
“We also have a need for the smaller guys,” Hayes says. “They buy half a load here and there, or a few pallets, but this adds up and eats up our odd pallets—it’s a very important element to balance our overall program.”
Healthy segmentation
Additionally, accounts in the small and medium categories may, at times, be willing to pay less for borderline product, Hayes observes.
The corn isn’t bad, it’s just less than perfect and not top of the line product anchor customers demand and accept. Because the small and medium buyers have avenues not available to the large customers, they can sell it for less.
Most shippers need a certain number of these customers to facilitate the movement of many different grades of produce to a variety of customers. This benefits the hard work and expense incurred by the grower community and lessens waste, Hayes explains.
Location and channels
Besides looking at a potential customer’s revenue and what it intends to spend, geographic location should be a consideration as well.
How much will it cost to ship product to a particular company? Is its business worth the expense?
Diversification can also include multiple sales channels within each industry segment, says John McClelland, CEO of Liberty Fruit Company, Inc., BB #:105664 in Kansas City, KS.
“For retail, this means targeting chains, independents, convenience, and even home-delivery clients with solutions unique to their platforms,” McClelland explains. “And in foodservice, innovations relevant to independent restaurants are different than those that can help institutional or larger chain customers.”
Bear in mind that not every client will be a match, or the timing isn’t right. Saying “no” to customers can be difficult, but if these customers aren’t a good fit for any reason, it’s the right thing to do.
“We had to turn away many during the height of the pandemic last year,” recalls Hayes. “We didn’t lose any of our regular customers. In order to manage them well, we couldn’t take on any new customers during that period.”
Financial considerations
Because the economy fluctuates cyclically, recessions occur naturally between growth periods. Signs of an impending recession include increased requests for unemployment benefits, decreased retail sales, and a reduction in income.
With a solidly mixed client base, it’s much easier for companies to survive an economic downturn. Losing one or two clients won’t have as big an impact as losing the largest or in a worst-case scenario, all or most of them.
With an assortment of customer types, businesses can also maintain better cash flow. Some buyers will still be able to pay invoices on time; some won’t. A broad customer base also serves to keep employees busy and the supply chain moving, to prevent laying off workers if one customer succumbs to a downturn or has a financial crisis.
“Due to varied levels of quality during production, we always work with a diversified level of customers,” says Rod Sbragia, director of sales and marketing at Tricar Sales, Inc., BB #:106364 in Nogales, AZ.
“Retail always wants the best of the crop, but we utilize other sizes and qualities to fulfill orders for foodservice and terminal market type customers.”
This is an excerpt from a Credit & Finance feature in the September/October 2021 issue of Produce Blueprints Magazine. Click here to read the whole issue.
