Southern SAWG - Food Hub Financing
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Financing Food Hubs & Other Healthy Food Enterprises Jim Barham – USDA Rural Development, DC Malini Ram Moraghan – Wholesome Wave, IL Dafina Williams – Opportunity Finance Network, PA Southern Sustainable Agriculture Working Group Conference Mobile, AL January 16, 2015
Transcript of Southern SAWG - Food Hub Financing
Financing Food Hubs & Other Healthy Food Enterprises
Jim Barham – USDA Rural Development, DC
Malini Ram Moraghan – Wholesome Wave, IL
Dafina Williams – Opportunity Finance Network, PA
Southern Sustainable Agriculture Working Group Conference
Mobile, AL
January 16, 2015
Presentation Overview
Financing Food Hubs:
Clarifying the Food Hub Concept
Financing and Stages of Business Development
Community Development Financial Institutions (CDFIs)
Snapshots at Each Development Stage
Your Turn!
Local/Regional Food Systems
Food Hubs
Aggregating Distributing Marketing Local Food
Regional Food Hubs
USDA Working Definition
A business or organization that actively manages the
aggregation, distribution, and marketing of source-
identified food products primarily from local and regional
producers to strengthen their ability to satisfy wholesale,
retail, and institutional demand.
Regional Food Hubs
Actively linking producers to markets On-farm pick up Production and post-harvest handling
training Business management services and
guidance Value-added product development Food safety and GAP training Liability insurance
Aggregation Distribution Brokering Branding and market
development Packaging and repacking Light processing (trimming,
cutting, freezing) Product Storage
“Buy Local” campaigns Distributing to “food deserts” Food bank donations Health screenings, cooking
demonstrations SNAP redemptions Educational programs Youth and community employment
opportunities
*Based on a working list of 302 food hubs identified by the USDA’s Agricultural Marketing Service (April 2014)
Regional Food Hubs
7 12 26
44 53 55 58 63
75 87 101
119
153
184
215
256
286 298
020406080
100120140160180200220240260280300
Growth in the Number of Food Hubs (2001-2013)*
At least 145 food hubs have started in the past five years (2009-2013),
as well as at least 83 in the past three years (2011-2013)
*Based on a working list of 302 food hubs identified by the USDA’s Agricultural Marketing Service (April 2014)
Regional Food Hubs by Legal Status*
Food Hub Legal Status Number Percentage
Privately Held 144 48%
Nonprofit 87 29%
Cooperative 61 20%
Publicly Held 7 2%
Informal 3 1%
*Based on a working list of 302 food hubs identified by the USDA’s Agricultural Marketing Service (April 2014)
Regional Food Hub Models*
Farm to
Consumer
39%
Farm to
Business
29%
Hybrid
32%
*Based on a working list of 302 food hubs identified by the USDA’s Agricultural Marketing Service (April 2014)
Sources of Capital for Food Hubs (and Other Healthy Foods Enterprises) Dafina Williams January 16, 2015
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About Opportunity Finance Network
• Financing Fund
• $100 million in OFN financing to CDFIs
• Public Policy
• Advocate for Opportunity Finance
• Knowledge Sharing
• Industry conferences and research
• Strategic Communications
• Brand development and marketing tactics
• Strategic Consulting
• Expertise for investors, partners and CDFIs
Leading national
network of CDFIs investing in opportunities
that benefit low-income, low-wealth, and other
disadvantaged communities
across America.
About CDFIs
What is a Community Development Financial Institution?
Private, mission-centric financial institutions
Focus on low-income, low-wealth people & communities
Nonprofit and For-Profit status
Depository & Non-depository
Certified by the CDFI Fund (U.S. Department of
Treasury)
Profitable but not Profit-maximizing CDFIs “Stand in The Gap”
Serving customers traditional banks cannot
Financial Services for the unbanked or under-banked
Patient lenders
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About CDFIs: Types of Lending
Small Business and Microlending
Healthy Food Financing: Food Deserts
Nonprofit Organization Financing
Affordable Housing
Residential Mortgages
Education: Charter School Financing
Healthcare: Community Health Centers
Commercial Real Estate
Consumer Finance: Alternative to Pay-day Loans
Venture Capital
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CDFIs and Healthy Foods Financing
Financing available all along the food system
$90 million in financing to CDFIs from US Treasury
Traditionally retail-focused lending
Mid-tier sector has high growth potential
Alternative to conventional lending
Flexible, patient capital
Well-suited to meet borrower needs
Business plan support and review
CDFI lending to food-based businesses
Business stage determines financing tool
Facilitate collaboration between multiple lenders
Experience working in underserved communities
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CDFI Financing of Mid-Tier Food System Enterprises
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Challenges for Borrowers
Poor or no credit history
Collateral shortfalls
Lenders hesitant to finance start-up businesses
Capital often needed to start or expand business but cannot afford to take on significant debt
Challenges for Lenders
Inconsistent credit quality for food-based businesses
Business needs are broad and diverse and loan sizes may need to be adjusted
Can be difficult to determine a reasonable pricing structure for small loans
Other Capital Sources for Mid-Tier Food System Enterprises
Public
Federal Community Economic
Development Program
Federal-State Marketing Improvement Program
Intermediary Relending Program
Value-Added Producer Grants
State Specialty Crop Block Grant
Michigan Good Food Fund
State Small Business Credit Initiative
Local Small Business Development
Centers
Private
Financial Institutions Local and Regional Banks
Community Banks and Credit Unions
Foundations RSF Social Finance
Intermediaries Nonprofit Development
Companies
CDFIs
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OFN Resources
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Resources OFN website www.ofn.org
CDFI Coverage Map http://ofn.org/cdfi-coverage-map
CDFI Locater http://ofn.org/cdfi-locator
CDFI Fund Capacity Building Resources
http://www.cdfifund.gov/what_we_do/FinancingHealthyFoodOptionsResourceBank.asp
Financial Resources Catalog
http://cdfifund.gov/what_we_do/FinancingHealthyFoodOptionsResourceBank.asp
Contact Dafina Williams, Senior Associate, Public Policy
215-320-4318
Regional Food Hubs
Actively linking producers to markets On-farm pick up Production and post-harvest handling
training Business management services and
guidance Value-added product development Food safety and GAP training Liability insurance
Aggregation Distribution Brokering Branding and market
development Packaging and repacking Light processing (trimming,
cutting, freezing) Product Storage
“Buy Local” campaigns Distributing to “food deserts” Food bank donations Health screenings, cooking
demonstrations SNAP redemptions Educational programs Youth and community employment
opportunities
Stages of Business Development
Concept & Planning
Proof of Traction
Survival & Success
Growth
What is our idea?
What do we want
to do and why?
What is our goal?
Pilot, test market
Can we sell
our product or
service?
Expand beyond
1 customer or a
pilot test market
Can we sell our
product or
service…….
PROFITABLY?
How will we
grow, sustain?
Stages of Business Development
Concept & Planning
Proof of Traction
Survival & Success
Growth
High Risk,
No return funding
Grants, Savings,
“Friends and
family,”
Crowdfunding
High Risk,
Flexible, Risk
adjusted return
Grants, Savings,
Crowdfunding,
Agency Loans
(SBA, Eco Dev);
Angels, VC
Variable Risk
Return driven
Cashflow,
CDFIs, Banks,
Angels, VC,
Private
investors
Less Risky
Return driven
Cashflow
CDFIs, Banks,
Larger private
investment
groups
Capital Stacking
Source: Oregon Capital Scan: A Line is Drawn. University of Oregon’s Business Innovation Institute, June 2014.
GrowNYC - Nonprofit with 35 years of experience helping
family farms and ensuring a supply of fresh, healthy produce for all New Yorkers
Programs Greenmarket – 53 farmers markets, with 230 participating producers
Youthmarkets – 13 teen run farm stands, created 70 youth jobs
Wholesale Farmers Market – $5 million in annual sales
Fresh Pantry – over 500k donated from Greenmarkets
YUM Food Box – 70,000 lbs of produce sold since its start in June 2010
Fresh Bodegas – 11 coolers installed with over $4k in local produce sales
Greenmarket Co. – GrowNYC established a food hub in 2012 serving NYC food retailers, institutional buyers, and GrowNYC programs
Food Hub Financing – Snapshot at Start-up/Early Stage–
9/12/2012
XXX
XXX
XXX
Food Hub Financing –GREENMARKET CO. Start-up/Early Growth Stage–
Snapshot of Greenmarket Co.
Established 2012 6 full-time and 4 part-time employees $650,000 gross sales for 2014 Works with 50+ producers 100+ customers - grocery stores, restaurants, senior centers,
and GrowNYC Youth Markets and Food Box program Over 60% of sales to date have been to buyers serving low- to
mid-income consumers
Key Supply Chain Partner
City Harvest – initially utilized excess storage capacity at food relief organization’s warehouse.
Recently moved to their own 5,000 sq. ft. warehouse
Food Hub Financing –GREENMARKET CO. Start-up/Early Stage–
Some of the Funding Streams
Planning stage: USDA Farmers Market Promotion Program (FMPP) and USDA Healthy Urban Food Enterprise Development (HUFED) Program
Implementation stage: Doris Duke Charitable Foundation, Deutsche Bank Americas Foundation, New World Foundation
Beginning expansion: City of NY grant – truck purchase; USDA Local Food Promotion Program (LFPP) – for working capital, marketing and sales.
Food Hub Financing –GREENMARKET CO. Start-up/Early Stage–
Stage of Business Development - USDA Grants for Food Hubs -
Planning
Implementation
Growth
Rural Business Enterprise Grants
Local Food Promotion Program
Specialty Crop Block Grants
Value-Added Producer Grants
Local Food Promotion Program
Specialty Crop Block Grants
Value-Added Producer Grants
Business and Industry Guaranteed Loans
Community Facilities Loans and Grants
Rural Business Enterprise Grants
Local Food Promotion Program
Specialty Crop Block Grants
Value-Added Producer Grants
Farm to School Grants
Community Food Projects Competitive Grants
Examples: CDFIs and Mid-Tier Food System Enterprises
Greensgrow – Philadelphia, PA Nonprofit urban farm, retail nursery, and food distribution business
Growth stage of business
17 years in operation
More than $1.1 million annual revenue
Sources of Capital
Revenue from earned income (93 percent)
CSA operation
Farm stand
Plant Nursery
Other (Direct to Restaurant, Community Kitchen)
Grants (7 percent)
Recent expansion to second Philadelphia location
and Camden, New Jersey 27
La Montañita Cooperative – Albuquerque, New Mexico Food Aggregation and Distribution Center; Retail
Organized as Cooperative
Mature stage of business
31 years in operation
More than $28 million annual revenue
Sources of Capital
Earned income from operations
Loans from Capital Impact Partners
Loans from local community bank
Community Investment Initiative
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Examples: CDFIs and Mid-Tier Food System Enterprises
OPEN DISCUSSION
Your Turn!
Moving Food Along the Value Chain: Innovations in Regional Food Distribution By Adam Diamond & James Barham – USDA Agricultural Marketing Service
Regional Food Hub Resource Guide Food hub impacts on regional food systems, and the resources available to support their growth and development By USDA Agricultural Marketing Service and the Wallace Center at Winrock International
The Role of Food Hubs in Local Food Marketing By James Matson, Martha Sullins, and Chris Cook – funded by USDA Rural Development
Food Hub and Distribution Resources
Electronic copies of these publications can be downloaded for free at www.ams.usda.gov/FoodHubs
Food Value Chains: Creating Shared Value to Enhance Marketing Success – joint project
between USDA and the Wallace Center
The report is designed to provide guidance to the reader on how food value chains are initiated and structured, how they function, and the benefits they provide to participants.
New Report on Food Value Chains
http://dx.doi.org/10.9752/MS141.05-2014
USDA’s Food Hub Portal www.ams.usda.gov/FoodHubs
A catalogue of USDA's research findings, resources, and support for food hubs
Food Hub and Distribution Resources
National Food Hub Collaboration http://foodhub.info
Map and list of known food hubs, current news, webinars, conference proceedings, print resources
Food Hub Benchmarking Webinar on Thursday!
www.usda.gov/knowyourfarmer
Website: One-stop shop for financial
and technical assistance resources from USDA to grow your local food enterprise www.usda.gov/knowyourfarmer
The Compass: How USDA resources
are put to work in your community www.usda.gov/kyfcompass
The Compass Map: See what’s
funded in your community and learn how others are using USDA programs
USDA’s “Know Your Farmer, Know Your Food” Initiative
Know Your Farmer, Know Your Food: - Resources for Navigating USDA -
www.usda.gov/knowyourfarmer
Farm Microloans
Farm Storage Loans
Organic Cost Share
Grass-fed Verification
Environmental Quality Incentives Program (hoop houses/high tunnels)
Rural Energy for America Program
USDA Programs in the Local Food Supply Chain
Business and Industry Guaranteed Loans
Community Facilities Loans and Grants
Rural Business Enterprise Grants
Rural Business Opportunity Grants
Value-Added Producer Grants
Local Food Promotion Program
Conservation Reserve Program
Agricultural Conservation Easement Program
Conservation Stewardship Program
Environmental Quality Incentives Program
Business and Industry Guaranteed Loans
Community Facilities Loans and Grants
Rural Business Enterprise Grants
Rural Business Opportunity Grants
Local Food Promotion Program
Specialty Crop Block Grants
Farm to School Grants
Senior Farmers’ Market Nutrition Program
WIC Farmers’ Market Nutrition Program
Community Food Projects Competitive Grants
Farmers Market Promotion Program
Specialty Crop Block Grants
Land Conservation
Processing
www.usda.gov/knowyourfarmer
Aggregation/ Distribution
Production Markets / Consumers
Rural Cooperative Development Grants
Small Business Innovation Research
Risk Management Education Program
Federal State Marketing Improvement Program
Conservation Technical Assistance
Beginning Farmer and Rancher Development Program
Sustainable Agriculture Research and Education Program
Agriculture and Food Research Initiative
Research, Education, and Technical Assistance Programs – all along the supply chain
Includes data on:
USDA-funded local food projects
Farmers markets, food hubs, and other “context data” gathered by USDA agencies
Projects and resources from 9 other Federal Departments
The KYF Compass Map
www.usda.gov/kyfcompass
Explore Options, Partnerships, and Opportunities
Find Resources to Fit the Need
www.usda.gov/kyfcompass
Jim Barham USDA Rural Development
Washington, D.C. 202-690-1411
www.usda.gov/kyfcompass
www.usda.gov/knowyourfarmer
Thank You!
