Food Hubs: Issues, Opportunities, and Propositions for Practitioners
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Transcript of Food Hubs: Issues, Opportunities, and Propositions for Practitioners
FOOD HUBS: ISSUES, OPPORTUNITIES, AND PROPOSITIONS FOR PRACTITIONERS
Richard A. Heiens, University of South Carolina Aiken
James Matson, Matson Consulting
WHAT MAKES THESE APPLES DIFFERENT?
Presented July 8, 2012 - IMDA Helsinki, Finland
ANSWER:
One was sold at an American supermarket and went through the traditional distribution channel for produce. It probably travelled at least 1,800 miles from
the farm to the consumer’s plate (25% farther today than in 1980- Halweil, 2002).
The other was sold through a developing local foods marketing channel. It only travelled 46 miles from farm to plate.
Presented July 8, 2012 - IMDA Helsinki, Finland
INTRODUCTION
U.S. consumers are willing to pay a premium for local foods
Food hubs are a way for producers to find local markets
Food hubs are emerging as a solution for local food marketing in the United States
Presented July 8, 2012 - IMDA Helsinki, Finland
LOCAL FOOD BUZZ
Last ten years have been transformative- Sales of organic foods in the U.S. tripled from 2000-2009 to almost $25 billion.
New consumer decisions to buy locally- Have led to multi-farm Community Supported Agriculture (CSA) programs, where small to medium sized farmers bundle their output to local markets.
Local food sales were estimated to have achieved $7 billion in 2011 (USDA‐ERS)
Presented July 8, 2012 - IMDA Helsinki, Finland
WHAT IS A FOOD HUB?
USDA’s working definitionVs
Broader Definition of Food Hubs
Presented July 8, 2012 - IMDA Helsinki, Finland
USDA DEFINITION OF A FOOD HUB
“A business or organization that: actively manages; the aggregation, distribution, and
marketing; of source‐identified local or regional
food products; primarily sourced from small to mid‐
sized producers for delivery to retail, foodservice, and/or
institutional buyers”.
Presented July 8, 2012 - IMDA Helsinki, Finland
BROADER DEFINITION OF FOOD HUBS
Should be defined in terms of function rather than form: Some food hubs exist in a virtual context,
transmitting information between buyers and sellers of local and regional food products.
Many hubs evolved from an educational or social mission:
striving to keep food dollars in the local economy keeping working agricultural lands in production
Presented July 8, 2012 - IMDA Helsinki, Finland
FOOD HUB MATURITY
Presented July 8, 2012 - IMDA Helsinki, Finland
THE VARYING FUNCTIONS OF FOOD HUBS
Market Access for Local Foods- Local consumers access to local producers
Information Flow and Sharing- Good Natured Family Farms
Transportation and Distribution- Costliest and most complicated aspects of operating a food hub
Brokerage Service- Traditional mid value chain role in food sales
Presented July 8, 2012 - IMDA Helsinki, Finland
THE VARYING FUNCTIONS OF FOOD HUBS
Increasing Market Share by Bundling- Community Supported Agriculture (CSA)
Increasing Market Share by Extending the Season
- Coordinating existing product lines
Maintaining a Consumer-Producer Connection- a two way informational marketing channel
Presented July 8, 2012 - IMDA Helsinki, Finland
FOOD HUB PRODUCT OFFERINGS
Presented July 8, 2012 - IMDA Helsinki, Finland
GROWTH OF U.S. FOOD HUBS
Source: USDA AMS
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201110
30
50
70
90
110
130
150
170
45 47 51 5465
7382
101
117
133145
162
Growth in the Number of Food Hubs (2001-2011)
Presented July 8, 2012 - IMDA Helsinki, Finland
U.S. FOOD HUB DISTRIBUTION
Presented July 8, 2012 - IMDA Helsinki, Finland
CONSTRAINTS TO GROWTH OF FOOD HUBS
Capitalization Liability
- Tort risk and contract risk Local Processing Capacity
- Challenge of processing of meats Human Resources Capacity
- Business management
Presented July 8, 2012 - IMDA Helsinki, Finland
BUSINESS STRUCTURE OF FOOD HUBS
The Evolving Non-profit Entity- E.g. Eastern Carolina Organics (ECO)
Cooperative Structured Food Hubs For-Profit Food Hubs
- E.g. Colorado Homestead Ranches (CHR)
Multi-Structured Food Hubs
Presented July 8, 2012 - IMDA Helsinki, Finland
VIRTUAL FOOD HUB AS AN INFORMATION SOURCE
Creation of Networks and the Linking of Buyers
- E.g. OmOrganics
Product Assurances- Assurances about product quality
Traceability- Point of origin
Presented July 8, 2012 - IMDA Helsinki, Finland
ROADMAP FOR FOOD HUB DEVELOPMENT: PRINCIPLES AND PROPOSITIONS
Strategic plan with clear goals
Management oversight team has all stakeholders engaged
Understanding of different direct markets and how to access them
Presented July 8, 2012 - IMDA Helsinki, Finland
ROADMAP FOR FOOD HUB DEVELOPMENT: PRINCIPLES AND PROPOSITIONS
An educational program may be part of the hub development
The hub may have to reduce risk on the buyer’s side to access markets
Capital is required for supply chain infrastructure
Presented July 8, 2012 - IMDA Helsinki, Finland
ROADMAP FOR FOOD HUB DEVELOPMENT: PRINCIPLES AND PROPOSITIONS
No one type of business structure is best fit for food hubs
Efficient management of information is critical
Legal Status of Food Hubs
Presented July 8, 2012 - IMDA Helsinki, Finland
DEFINITIONS:
C corporation refers to any corporation that, under United States income tax law, is taxed separately from its owners. Any distribution from the earnings and profits of a C corporation is treated as dividend for U.S. tax purposes.
S corporations do not pay any federal income taxes. Instead, the corporation's income or losses are divided among its shareholders. The shareholders must then report the income or loss on their own individual income tax returns.
LLC is an unincorporated association and is not a corporation. Owners of the LLC are protected from some or all liability for acts and debts of the LLC.
Presented July 8, 2012 - IMDA Helsinki, Finland
POTENTIAL FOOD HUB BENEFITS
Environmental benefits- Less transportation costs and less traffic congestion
Social benefits- Supplying schools with fresh foods
Economic benefits- Higher margins for farmers
Development of local human capital- Producer training and capacity building
Presented July 8, 2012 - IMDA Helsinki, Finland
CONCLUSION
Conventional U.S. Food Marketing Chains are ill equipped to maintain the traceability of producer to consumer
Food Hubs serve to connect producers and buyers and maintain traceability as a value proposition
Presented July 8, 2012 - IMDA Helsinki, Finland