We decided to calculate TAM/SAM/SOM for two different markets that FarmLink serves: consumers and restaurants.
Farm-to-Table Produce for Consumers
TAM: All households in the United States
- 131 million households
- 40% are interested in fresh, local, and sustainable food options (38.1 M)
- https://vegnews.com/sustainable-food-sodexo-new-culture
- Average annual spending per household = $1,200
- https://www.sacbee.com/news/california/article284363354.html
- TAM=131 million households × 40% × 1,200USD/household/year = 62.88 billion USD/year
SAM
- FarmLink can target around 20% of households in both urban and rural regions
- 20% for SAM: Represents FarmLink’s near- to medium-term reach based on its expanding logistics, current infrastructure, and the wide appeal of fresh, local, and sustainable food to urban and rural consumers.
- SAM=131 million households × 20% × 1,200USD/household/year = 31.44 billion USD/year
SOM
- FarmLink may capture around 2-3% of the SAM
- 2-3% for SOM: Reflects realistic growth based on the company’s current stage, subscriber base, competitive landscape, and operational capacity. It takes into account both the company’s scaling trajectory and the time required to penetrate a competitive and logistically complex market.
- SOM=31.44billion USD/year×2%=628.8 million USD/year
Farm-to-Table Produce for Restaurants
TAM: Produce spending by all restaurants in the United States
# of restaurants in the US: 749,000 – Source
- Restaurants keep food costs around 30% of their revenue – Source
- Assume that produce accounts for 25% of total food costs and we provide all of their produce
- Average restaurant revenue:
- Total US food-away-from-home spending: $1.5 trillion – Source, let’s assume that restaurants make up 50% of that = $750 billion
- Number of restaurants: 750,000
- Average revenue = $1m
- Average annual food cost for a restaurant: $1,000,000 revenue = * 30% share of revenue = $300,000
- Annual produce spend = $300,000 annual food cost * 25% share of spend = $75,000
TAM = $75,000 annual produce spend * 750,000 restaurants = $56,250,000,000 = $56.25 billion
SAM: Restaurants that value fresh or local produce
Rough estimate of what percentage of restaurants value fresh/local produce: 30%
Reasoning:
- Many high-end and mid-range restaurants, especially in urban areas, have embraced farm-to-table concepts.
- There’s been a growing trend towards healthier eating and sustainability across the industry.
- However, a large portion of the restaurant industry consists of fast food, chain restaurants, and smaller establishments that may not prioritize local or fresh produce due to cost or logistics.
SAM: $56.25 billion TAM * 30% serviceable = $16,875,000,000 = $16.88 B
SOM: Restaurants in major cities that value fresh/local produce and can afford to purchase premium produce
- Business model: Restaurants buy subscription-based weekly or bi-weekly deliveries of curated produce boxes.
- NYC (48,960 ), LA (14,440), Chicago (7,300 restaurants), Houston (10,000), Philadelphia (12,620) — total = 93,320
Viable restaurants = 93,320 * 30% (value fresh/local produce) * 50% (can afford fresh/local produce) ≈ 14,000
SOM = $75,000 annual produce spend * 14,000 viable restaurants = 1,050,000,000 USD = $1.05 B
