National Convening of the Good Food Network

Case Research of Food Value ChainsChicago IL

November 20, 2008 (gwsteven@wisc.edu)

Percentage Change in US Farms by Sales Class, 1997 - 2002

-15%

-10%

-5%

0%

5%

10%

< $5,000 $5,000-$25,000

$25,000-$50,000

$50,000-$100,000

$1000,000-$500,000

$500,000-$1,000,000

<$1,000,000

AOTM Working Group Structure

Business & Marketing Options

Value-Added

Commodity

Very Small

Very Large

1. Direct Sellers

2. Cooperative Sellers

3.Low Margin/ High Volume

4. Troubled Zone

Farmers’ MarketsCSA’s

Internet Sales

Strategic Alliances&

Food Value Chains

Mid-scale CommodityProducers

Large-scalecommodity Producers

Tiers of the Food System

Tier 0 Personal Production of Food

Tier 1 Direct Producer to Consumer

Tier 2 Strategic Partners Embedded in Supply Chain Relationships (multiple scales)

Tier 3 Large Volume Aggregation and Distribution

Tier 4 Global Anonymous Aggregation and Distribution

Tier 0

Tier 1

Tier 2

Tier 3

Tier 4

Definition of Mid-tier Food Value Chains: Values-based strategic business partnerships Featuring mid-scale agri-food enterprises that Create and distribute responsibilities and

rewards equitably across the supply chain, and

Operate effectively at regional levels with Significant volumes of high-quality,

differentiated food products.

Case Studies

Country Natural Beef [www.oregoncountrybeef.com]

Shepherd’s Grain [www.shepherdsgrain.com] Organic Valley Family of Farms

[www.organicvalley.coop] Red Tomato [www.redtomato.org]

Key Characteristics of Mid-tier Food Value Chains: Engage value/values in products and

business relationships Emphasize organizational interdependence.

trust and transparency: shared support & shared reward

Achieve scale & volume through cooperation and aggregation of mid-scale producers

Enable mid-scale enterprises to be competitive

Farmers, Ranchers, and Fishermen: Are treated as strategic partners, not as

interchangeable input suppliers Negotiate prices based on production and

transaction costs, plus a reasonable margin Experience agreements/contracts as fair and

for appropriate time frames Control brand identity up the supply chain …

co-branding with strategic partners Participate fully in value chain decisions

Challenges and Opportunities:

Creating & Marketing Significant Volumes of Differentiated Food Products

Creating Effective Internal Organizational Forms

Selecting Value Chain Partners [Shared values, different competencies, and

complementary business models]

Challenges and Opportunities Cont. Developing Effective Supply Chain Logistics

Achieving Economic Sustainability [commitment to the economic welfare of all strategic partners;

supply management, stable pricing, and cost-of-production-based pricing]

Future Dynamics [engaging consumers as strategic partners and deeper

differentiations]

Big Themes:

Building Out a Middle Tier in the U.S. Food System

1) Develop, test, communicate, and proliferate a “new business logic”

2) Address key systemic issues

[The “Good Food” bundle & Michael Pollan’s list]

Big Themes Cont.

Value Chains Can Be Both “Smart” and “Right”

1) Smart Business: strategic partnerships (social capital) replace economic capital and expertise; nimbleness in the market; quality control efficiencies; food miles and food safety efficiencies; geographical identities

2) Ethical Business: equitable distributions;

participatory organizations and alliances; ethical differentiations

Other References

www.agofthemiddle.org

Thomas Lyson, G.W. Stevenson, and Rick Welsh, eds. 2008. Food and the Mid-Level Farm: Renewing an Agriculture of the Middle. The MIT Press, Cambridge MA.