Local food hubs

1Farm to School Summit June 2013

Local food distribution hubs

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Regional Food Hubs

Regional Food Hubs• Defining characteristics of a Regional Food Hub

•Carries out or coordinates the aggregation, distribution, and marketing of primarily locally/regionally produced foods from multiple producers to multiple markets.

•Considers producers as valued business partners

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Regional Food Hubs

• Works closely with producers

• Uses product differentiation strategies to ensure that producers get a good price for their products.

• Aims to be financially viable while also having positive economic, social, and environmental impacts within their communities

• “Food Hubs” without infrastructure• Developed strategic partnerships with other supply chain actors

who can provide warehousing, processing, and distribution services.

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Regional food hubs

• How do they help farmers and ranchers?• Expanded market and revenue options

• Good for farms that may need to sell beyond direct market channels, but lack supply to effectively work with wholesale markets

• Distribution and Marketing services• Good for farms who are unable to devote time and capital to

distribution infrastructure and wholesale market relationships.

• How do they help buyers?• Wholesale buyers often find it too costly to purchase products

directly from numerous farms and prefer to reduce transaction costs by buying product from distributors.

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Regional Food Hubs

• What are the impacts of food hubs?• Economic Impacts

• Based on the 2011 National Food Hub Collaboration (NFHC) survey, food hubs gross nearly $1 million in annual sales on average, with many showing double and even triple digit annual sales growth• Example: The Oklahoma Food Cooperative, which started in 2003

with 36 customers and $3,500 in sales in its first month of operation, now generates about $70,000 in MONTHLY sales of products from approximately 200 producers.

• Job Creation• From the survey: Food hubs create an average of 7 full-time jobs and 5

part-time jobs.

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Regional Food hubs

• What are the impacts of food hubs?• Retaining and Creating Other Agricultural Jobs and

Businesses

• Offering producers an opportunity to capture higher value for their products•A recent USDA Economic Research Service report that studied five local food supply chains found that producers in the local food supply chain received a greater share of the retail price than they did from a mainstream food supply chain, with producer net revenue per unit in local chains ranging form roughly equal to more than seven times the price received in mainstream chains.

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Regional Food hubs

• Other impacts of Regional Food Hubs:• Community development• Healthy Food Access

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Aggregation and Distribution

• Models and Examples• Aggregation facilities with distribution

• Aggregation facilities without distribution

• Distribution/Marketing services without aggregation facilities

• Web-based aggregation

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Aggregation Facilities with Distribution

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Aggregation Facilities with Distribution

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Aggregation facilities without distribution

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Distribution/Marketing services without aggregation facilities

Bayfield Regional Food Producers Cooperative

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Web-based Aggregation

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Economic Viability OF Food Hubs

• Based on the profiles of food hubs interviewed• Viability is not based on geographic location or type of

legal structure• Median years of operation for economically viable food

hubs was 9.5 years.• Economically viable food hubs reported minimum gross

sales of $1 million per year and median gross sales of $6 million per year.

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Economic Viability

• Investing in growth while supporting broader social missions• Many food hubs may be well positioned to carry out the

core aggregation and distribution functions without external subsidies, they recognize that they need further support/partnerships if they are to offer a variety of complementary producer and community services.

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Challenges

• Balancing supply and demand• Most of these food hubs are finding that the demand for

locally produced food is simply greater than their regions can supply, especially within certain product categories

• Price Sensitivity• While demand is there, many wholesale buyers resist

paying more from a food hub than they would from another distribution entity.

• Managing Growth• Knowing when and how much to invest in infrastructure to

keep up with market demand

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Challenges

• Access to capital• Not only for infrastructure investments, but also for

securing short-term revolving credit lines to maintain adequate cash flow for payments.

• Other notable challenges• Dependence on volunteer labor• Finding reliable seasonal and part-time staff• Food safety requirements• Licensing and permit requirements• Legal parameters of hub relationships

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Challenges

• Learning from a co-op closure• Dissolution of Producers and Buyers Co-op holds lessons

for others pursuing institutional markets. • By Margaret M. Bau, Co-op Development Specialist

• USDA Rural Development, Wisconsin

• Producers and Buyers Co-op• It was a multi-stakeholder cooperative in which members

represented all aspects of the local food system: producers, local processors, transport providers, and regional institutions. For three years, the co-op coordinated the processing and delivery of locally grown chicken, beef, cheese, pork, produce, fish, eggs, bison and lamb to area hospitals.

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Challenges

• Producers and Buyers Co-op• Lesson #1: Multiple Members are needed in each

membership class; don’t become identified as one member’s project.

• Lesson #2: Raise sufficient capital before launching; hire an experienced manager

• Lesson #3: Require contracts between parties

• Lesson #4: Educate and train members at all levels

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Finding funds

Funding Search Resources•Got Moola – (Google “Got Moola DATCP”) • Carl Rainey, 608-224-5139, carl.rainey@wi.gov

Government Funds:

•Building Sustainable Farms, Ranches, and Communities - https://attra.ncat.org/guide/ •Page 35 in the USDA Regional Food Hub Resource guide has identified 30 grant and loan programs that could potentially finance various aspects of food hubs

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Finding funds

• Foundations in Wisconsin - http://www.wifoundations.org/ (Demo the online version there)• (414) 288-1515, Mary.Frenn@Marquette.edu

• Community/Social Investment opportunities• Slow Money• Community Investment Funds• Selling stock

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Other Resources

• USDA AMS – Regional Food Hub Resource Guide

• Building Successful Food Hubs – A business Planning Guide for Aggregating and Processing Local Food in Illinois