I’ve been hearing a lot about food hubs lately, but it wasn’t until Iattended a workshop at NESAWG this past February that I fully understood what they are. What I’ve been calling aggregators (companies like Farmers to You and Boston Organics) are, in fact, food hubs. So here’s what I learned:
Jeff Farbman (of the Wallace Center) offered the following definition: ”A regional food hub is 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.”
Sounds simple, right? But how do they do it?
The defining characteristic of food hubs is that they work closely with multiple small producers, buyers, and products. They support these producers by helping them enter the wholesale market, with the end goal of creating a multiplier effect on local jobs and the local economy. Food hubs are also a key element in the effort to enhancing food security, because they increase capacity and value of small and mid-scale farmers, while contributing to a stronger and more localized food value chain.
It’s important to keep in mind that hubs are businesses themselves, not non-profits, so financial viability is key. As a nascent industry working out a new model, hubs often struggle because they haven’t fully established their systems. For example, the business must learn about logistics, distribution and warehousing. And to give you a sense of scale, the median food hub has 40 suppliers and approximately $1 million in annual sales.
The overarching challenge is this: how do you create efficiencies and economies of scale while keeping local businesses small?
Following these best practices for food hubs helps to answer that question.
- “Think Farmers First”: the priority of the food hub is to promote the farmers. They are the differentiators, and are what will keep the consumers purchasing from you as opposed to a national chain grocery store.
- Don’t bother selling commodities. A small food hub, or even a big one, will never be as successful as Sysco.
- Get buyer commitment for larger purchases so that transaction costs are cheaper.
- The need to sell year-round means expanding product offerings beyond fresh produce, so including value-added products beyond the harvest season is wise.
Finally, food hubs need to sweat the small stuff. Because food hubs are responsible for the entire value chain, they’ve got to pay close attention to detail all the way from the farmer to the consumer. For example, if you’re picking up arugula from 5, or 15, different farmers, you need to have everything under control along the way to make sure those greens get to the consumer in perfect shape. Those considerations go all the way from standardized bunch sizing, to having sufficient and consistent packaging and labeling, and keeping a cold chain through to the end consumer. Most importantly, you’ve got to be able to coordinate your communication between each different party at each step of the process.
Given the scale of a food hub’s partner operations, a particular concern for food hubs can be product availability. Supplying big orders, and even wholesale accounts, from small to midsize suppliers means that figuring out ways to maximize volume is key. If you’re aggregating, it makes sense to focus on sourcing the same product from several suppliers so you can find the volume that you need. Alternatively, a food hub might contract with farmers to specialize in a particular crop, or create farmer cooperatives to pool product. Farmers might also be encouraged to practice season extension to meet demand.
Dennis Derryck, of Corbin Hill Farm, works as both a farmer and an aggregator focusing on serving low-income communities in New York. He commented that food hubs can be an accessible alternative to CSAs for low-income consumers, who may not be able to afford the up-front cost and commitment CSAs require. Instead, a food hub can provide access to the same quality of produce without the cost barrier. Food security and food sovereignty go hand in hand, and food hubs can be an important way of connecting missing links in the whole value chain. We just need to figure out exactly what they are, and how to define them first!
For more information of food hubs, including webinars and case studies, The National Good Food Network has an excellent resource library.