Wholesaling options to grow your food business: Part 1

Diane Smith, Michigan State University Extension - August 13, 2014

Learn about your responsibilities when wholesaling with a cooperative, food hub or door-to-door company.

Selling at farmers markets is usually a great first step for your food businesses. It provides consumer feedback, the production level is smaller and the time is manageable. After perfecting this direct sales avenue, your business may want to consider options to increase your sales. This next step is wholesaling, which is selling a large quantity of your product to someone who will resell it.

You should select an avenue of wholesale with careful consideration as they vary in whom they serve, how much time you will need to dedicate, as well as how much capital they require. Regardless of what product you sell and where you wholesale it, you will need to produce your product in a licensed kitchen and you will need wholesale licensing through the Michigan Department of Agriculture Rural Development (MDARD) or USDA.

One wholesale avenue is to sell to a local food co-op or food hub. Although co-op’s and food hubs vary in how they operate, some market your product for you on their website, provide the location for the product exchange, take orders and pay you based on the orders that come in. The West Michigan Co-op is one example of such a co-op. You are then notified of how much was ordered so you can take the product to their location and the consumers can pick up their order. Since the customer is not paying you directly and the co-op or food hub is paying you for the order, this is considered wholesale in the eyes of MDARD.

Some organizations that offer online sales for you and door-to-door sales by companies who market your product may operate similarly. If you have a meat product, the rules will be different for you. Most meat products will either need to either get USDA licensing or you will need to work with the cooperative or food hub to sell the meat as a frozen product directly to the consumer and pay the cooperative for their services after your sale is complete. Working with a co-op that offers all of these services is one of the least time-consuming ways to wholesale your product. As you shop for these options, be sure you identify who pays you, the organization or the consumer, so you can understand whether you are selling directly to the consumer or the organization as this affects under whose regulations you will fall.

The MSU Product Center, in partnership with Michigan State University Extension, provides free business counseling for product development and marketing strategies that will help Michigan entrepreneurs commercialize high-value, consumer–responsive food products. For more information, visit the MSU Product Center website or call 517-432-8750.

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