Food Hubs: Helping Retailers Navigate Today’s Burgeoning Local Food Movement
“Consumer demand for local food is undeniable and growing. Not so obvious is what qualifies as ‘local.’ Nor is it clear how the food retail and service industries can pull safe and reliable quantities of small-volume product through large-volume wholesale channels.”
In those few sentences, Food Hubs: Solving Local, a March 2014 case study from the Wallace Center, sums up both the opportunities and the challenges that this new focus on buying local brings. The Wallace Center, a program unit of Winrock International, has been a leading organization in the movement for a more sustainable and equitable food system for more than 30 years.
So popular has the term “locally grown” become that it is commonly considered “the next organic,” according to Shopping for Local Foods in the U.S., a January 2015 report from market research company Packaged Facts. In 2014 alone, local foods generated almost $12 billion in sales, or approximately 1.8 percent of total retail sales of foods and beverages. That number will approach $20 billion in 2019, or 2.4 percent of total retail sales of foods and beverages, Packaged Facts predicts.
The Supply Chain Challenge
While most retailers understand the plus side of the local foods movement, their ability to meet customers’ demands for more local products poses significant challenges, according to William Gray, program associate at the Wallace Center.
“There can be any number of challenges standing between grocery retailers and their local and regional supply chain,” says Gray. “First, there is the question of ideology: What does ‘local’ mean to a grocery retailer, their customers and their supply chain partners?”
Next, Gray explains, are the operational challenges inherent in inventorying more local items.
Those challenges include establishing clear expectations for packaging and quality control; identifying producers who are compliant with any third-party food safety requirements; managing seasonality and price consistency; and managing transportation and handling logistics from the farm to the loading dock, Gray says.
Food Hubs Play a Role
To address these evolving supply chain challenges, retailers and foodservice companies are teaming with food hubs to differentiate themselves with local food programs and to satisfy strong consumer demand, according to Food Hubs: Solving Local.
“Food hubs as a sector arose to help remove barriers, and to build stronger supply chains between local producers and wholesale buyers like grocery retailers,” Gray notes. “By managing the needs of both supply chain and markets, hubs nationwide are playing a critical role in the scaling-up strategy of local producers while providing a local supply chain solution for the buying community.”
In fact, partnerships with grocery retailers make up a large and growing percentage of food hub customer concentration, with nearly 30 percent of all products sold through that channel, according to Counting Values, a report by the Wallace Center, Farm Credit East, Morse Marketing Connections and Farm Credit Council, coordinated by the National Good Food Network (NGFN) Food Hub Collaboration.
“Access to food hubs is also getting easier for grocery retailers, as the hub sector continues to grow steadily each year,” Gray adds. “We estimate that there are currently over 350 hubs operational nationwide, and with the market for local food now exceeding $12 billion [according to the A.T. Kearney study Firmly Rooted, the Local Food Market Expands], we believe that the need for and the impact of the food hub sector will continue to increase.”
Getting Acquainted with Food Hubs
Just how can retailers interested in working with their regional food hubs begin the process?
Food Hubs: Solving Local advises industry executives who want to get ahead of the curve to become acquainted with the food hubs in their territories and to take strategic steps to grow local food sales with them.
“Approaching [local food hubs] as a partner to help you address your needs in sourcing local will often work best. Many hubs are experiencing high rates of growth despite being early in their development. As a result, finding solutions that meet a retailer’s needs but also help the hub continue to develop and remain a strong supply partner is important,” Gray concludes.
For more comprehensive information about food hubs, including registration information for the 2016 National Food Hub Conference, visit http://ngfn.org/resources/food-hubs.