Until recently, most growers were not interested in selling directly to the public sector. They preferred to sell their produce to supermarkets or packhouses, while allowing hospitals and schools to get their supplies through specialist distributors.
However, over the past few years a great deal has changed. With the recent escalating interest in food quality, schools and hospitals are under pressure to use more healthy foods. And the interest in the environment means that the public wants locally sourced food. In addition, the Government has been encouraging public bodies to get their fresh produce from local suppliers. As a result, growers are starting to see the public sector as a potentially profitable market for their goods.
Associate director Stuart Thomson of English Farming & Food Partnerships (EFFP) explains: "It isn't a piece of cake, but if you're prepared to put in the work, you can make money out of the public sector."
The public sector covers a wide range of organisations. There are nursing homes, children's homes, prisons and the various armed services, as well as local and central government canteens. However, the most obvious markets for growers are schools and hospitals.
A recent report showed that in the South East alone, the public sector buys around a £1m worth of potatoes each year, along with a similar quantity of apples. The total demand for food of all types in the South East's public sector is estimated at around £150m.
According to EFFP, the public sector nationally buys around £2bn of of food every year. This makes it an enticing prospect for growers.
In the past, many growers were wary of getting involved with public sector tendering. South East Food Group Partnership public procurement project officer Melissa Love points out that many growers feel that they produce mainly for supermarkets and do not want to divert their energies.
And public sector buyers have historically been less than enthusiastic about dealing directly with growers. Many are unwilling to go through the work of negotiating smaller contracts, preferring to deal only with the major food suppliers. But this is beginning to change.
There are some difficulties in selling to public bodies. "It's not a high-margin business," says Love. "The public bodies have to be highly competitive and are under enormous pressure to get the contract as cheaply as possible."
Anyone entering this market can expect a large amount of competition, she adds. "There are a lot of middlemen and you have to compete with them. Those people wanting to sell to public bodies can expect to find themselves having to compete with major food wholesalers and caterers."
In addition, public bodies will usually only have a relatively small purchasing team. They usually won't be prepared to deal with more than one supplier. "Hospitals won't buy carrots from one company and leeks from another," says Love. "They want just one firm to do the lot."
This means that growers either have to be involved in a co-operative or sell through an existing supplier. Thomson agrees with this analysis. "We're talking about people who are making meals. If possible, they want to buy all the ingredients from one supplier. The easier you can make it for the buyer, the more likely they are to take your produce."
Because of these problems, most growers have avoided involvement with the public sector - but things are changing. Due to pressure - both from the Government and from the public - public sector organisations are being forced to consider the environmental implications of their purchasing decisions. And this means that their suppliers, including the contract caterers and major food wholesalers, have to demonstrate their concern for the environment.
"Contract caterers are being made to care," Love explains. "All the big caterers have taken on sustainability managers because they want to be seen to be environmentally aware."
To anyone who can break into the market, there are obvious advantages. Thomson advocates more involvement by growers. He says: "With public sector contracts, the length of contract is usually very good - often a couple of years. It is also recession-proof - people in schools, hospitals and prisons have to eat. It offers a degree of certainty."
He points out that many producers use their public sector sales as a way of spreading risk - even if a major retailer decides to cancel a contract, the grower will still have a reliable outlet. And public sector bodies are usually reliable payers. Most will pay on a 30-day basis: none of the growers approached for this article said they had faced any serious delays in payment.
Thomson suggests that public sector sales should be part of a wider strategy. "The key is not to look at it as the single outlet for your products. It should be seen as a complementary market and an alternative outlet for your existing goods."
He points out that the public sector has different specifications to supermarkets or food-processing plants. Schools and hospitals will want to buy fresh, nutritious and tasty food, but are unlikely to care if the vegetables are mis-shapen or over-sized.
The fact that the public sector will take non-standard-sized produce has been a boost to many sellers. This has been particularly important in schools, to which the Government is providing free fruit. Worldwide Fruit - a firm owned half by British growers and half by New Zealand growers - supplies more than 2,000 schools in London and the South East. The schools are supplied with the smaller fruit that supermarkets normally reject. Marketing director Steve Maxwell explains: "This gives us an outlet for our smaller apples and gets the children eating fruit at an early age. It also encourages supermarkets to stock smaller apples, because children are used to that size."
In January 2007, Oxfordshire-based Waterperry Gardens took advantage of a bumper crop from its 2ha orchard by supplying local Wheatley Primary School with free apples. Orchard manager Chris Lanczak said the aim was to encourage healthy eating among pupils.
Moving into the market
Anyone wanting to sell to public sector has to follow the strict procurement rules (see panel on bureaucracy, opposite page). Most of the big wholesale suppliers such as Sodexo and 3663 want to be seen as environmentally friendly and welcome approaches from growers. In many cases, these firms will have details on their websites to help potential suppliers.
The Government is currently encouraging public sector buyers to use small local suppliers. Government documents point out that each £10 spent on local suppliers will generate £25 worth of business. Growers can get advice from the Public Sector Food Procurement Initiative (PSFPI), details of which are on the Defra website (www.defra.gov.uk).
Thomson says: "A good place to start is the PSFPI. Each region has a co-ordinator for the scheme. You should also talk to procurement officers in the public sector. You can find out who the contract is with and talk to the major supplier."
Love recommends that growers "do some sleuthing". "You have to get involved in the system: go to conferences and look at websites," she says.
It helps if the buyers are conscientious about food quality and local supply. Kent-based Bank Farm owner Doug Wanstall was anxious to sell to the public sector, but "the first few times I approached public bodies, it was a total waste of time". It was only after government-funded body Sustain put him in touch with Royal Brompton Hospital that he began to get results (Grower, 21 February). The catering manager at the hospital was keen to improve food quality for staff and patients. He found that buying through Bank Farm allowed him to get food of a higher quality and, because it cut out the middlemen, meant that the produce was cheaper.
Wanstall had to band together with 30 other farmers to fulfil demands. He explains: "You can't just get people to buy seasonal goods. They are designing complete menus so you have to sell a full range of food." He now reckons to supply about 1,200 lines - around 250 of these are fresh produce, while the rest is ambient food, meat and fish. He has around 150 customers.
"We're regarded as an important selling point. One of our public sector customers even puts the name of Bank Farm on the menu, to stress the quality of the food." He proudly points out that one school in Maidstone, Kent, has a 75 per cent uptake of school meals - and "this is due to the quality".
However, he has to know when to turn down contracts. He was recently offered the chance to tender for 30 schools in Kent. "Although the contract was a reasonable size, the drop value (the size of each delivery) was too low. We decided not to bid."
The business has a turnover of £6m. Only five per cent of this is attributable to public sector sales, but Wanstall expects this to grow significantly. "We see this as an area for expansion," he says.
Purchasers are increasingly looking for higher-quality products, he adds. "There are hospitals that want to take the easy route, but many want to give their patients something better."
Anyone wanting to sell to the public sector should know the requirements:
- Each local authority will have its own procurement rules. Suppliers will have to demonstrate that they meet local authority rules. They must show that they have acceptable policies on employment practices, including equality and diversity issues. Suppliers will have to show "due diligence", ie that they meet health and safety regulations. They may also be asked for recognised accreditation so they meet EU and UK standards on such things as quality assurance. Growers may be expected to join initiatives such as the Red Tractor scheme. They may also be asked to prove that they are commercially stable.
- All public contracts have to meet EU rules. Major contracts - those worth more than around £100,000 - have to be advertised across the EU and follow EU tendering procedures.
- Contracts are awarded on a points system. The most important factors are obviously price and quality. However, points are awarded for sustainability. There are also points for firms that contribute to the local economy.
The local authority perspective
Cumbria County Council has a deliberate policy of trying to source food locally. Principal buying manager for the council Graham Lewis runs "meet the buyer" events for local companies. He also approaches local firms, which might be able to supply the area's 225 schools, 55 care units and the local meals-on-wheels service.
He explains: "This can all be very daunting for small companies, so we try to help them."
He currently gets his fresh produce from four local suppliers. "I can't trade with a grower unless it is a wholesale distributor. But I can bring growers and contracted wholesale distributors together." To help small firms, he has also split up production and distribution: this means that the small firms do not have to maintain their own fleets of vehicles.
He adds: "We try to buy locally where possible. We currently get local potatoes and leeks, as well as some swedes, cabbages, carrots, spring onions, lettuce and tomatoes."
He says around 25 per cent of the council's food requirements come from firms within Cumbria, although this includes milk, eggs, flour and prepared food. Around 30 per cent of contracts come from the slightly wider area of Cumbria and the North West.
Educating the users
There is no point getting local authorities to buy local brassicas if none of the school cooks knows what to do with them. To persuade public sector organisations to use more local food, it is important to teach them about seasonality and how to use it.
Essex-based Ashlyns was set up as a co-operative organic box company with a network of 50 growers. In 2006, after Essex allowed its schools to opt out of centralised catering contracts, Ashlyns started offering food for the school meals market.
The firm, with help from Defra, set up a training kitchen, which offers courses for school cooks. The kitchen gives advice on menus and food preparation and has an expert on call, who can advise the 40 individual schools that are linked to Ashlyns.
Operations manager Mark Smith says: "We want food to be brought back to the way it should be. Most of the cooks we train will buy the fresh produce from us, although there is no obligation for them to do so."
The firm also arranges farm visits by local school children. According to schools in the area, this has made the children more enthusiastic about the food on their plates.
Contains details of small tenders with advice on how to bid for them
Offers advice for growers and buyers
Advice and case studies from EFFP
Major contracts tendered by EU public sector bodies
In addition, each English region has a public sector food procurement initiative sponsored by the Government, which can give advice to growers.