Selling to food hubs

by Deborah Jeanne Sergeant

Food hubs can provide producers with a means of moving more produce. Mariel Borgman, MSU Extension community food systems educator, recently presented “Food Hubs: A Distribution Solution.”

Borgman explained the various tiers of the food system based on a bullseye, starting in the center with personal production of food in backyard gardens, community gardens, canning, hunting, gathering and fishing; then direct producer to consumer through farmers markets, farm stands and CSAs; then strategic partners in supply chain relationships, such as Organic Valley and food co-ops; then large volume aggregate and distribution such as grocery store chains; and finally, global, anonymous means through aggregation and distribution.

“Our food system operates at many levels,” Borgman said. “Near the bullseye is where consumers have an intimate relationship with where their food comes from. In the middle, we have a unique space where most food hubs operate. It’s the strategic partner area.”

She said value chain ideals could include equity and fair pay across the supply chain; sustainable farming practices and small ecological footprints; building resilient local communities; health and wellness; and food access and food sovereignty.

“You can think of it as a supply chain that has priorities for social or environmental benefit,” she said. “That’s the space where food hubs are operating.”

The USDA defines a food hub as “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.”

“‘Source identified’ is a key statement here,” Borgman said. “As we look across the tiers of the food chain, traceability changes. ‘Source identified’ becomes important for transparency.”

“Not all food hubs look the same,” Borgman said. “If you’ve seen one food hub, you’ve seen one food hub. They may have a variety of elements that have to do with how they interact with their end users.

Borgman shared a few findings of the 2017 National Food Hub Survey, the most recent one compiled. The survey indicated that food hubs contribute to the economy, are becoming an established sector and support farmers. The survey also indicated that 82% of food hubs have a mission related to ensuring producers receive a fair price and increasing small and mid-sized farmers’ access to markets.

“On average, 46% of a food hub’s suppliers are considered beginning farmers or businesses,” Borgman said. “Many times, these hubs are striving to connect with new businesses and help them build a solid marketing strategy.”

She added that food hubs may be nonprofit, for-profit, cooperative or another business model with distribution that’s wholesale, direct to consumers or a combination. They can be a mix of profit or income-driven, social enterprise and triple-bottom line enterprise.

She encouraged farmers to learn about a food hub’s business model to see if it’s a good fit.

The survey also broke down what food hubs carry by product category. “No matter what you have to offer, if you have any value-added products, they may be interested in that but the bulk of the business is in fresh produce and herbs and those grocery staples,” Borgman said.

The survey revealed that food hubs’ value-added services include aggregation, distribution services, product storage, on-farm pickup of product for distribution, packaging/repackaging, bulk purchasing on behalf of a producer, freezing, shared-use kitchens, cutting and canning.

Food hubs are interested in bolstering farms through marketing and promotional services for producers, actively helping suppliers and producers find new markets, branding or labeling products to indicate origin of product or other attributes, product planning/crop scheduling, production or post-harvest handling, connecting producers with grants or loans, offering business management services or guidance and liability insurance.

“Food safety support is pretty critical, especially for small producers with little experience with food safety,” Borgman said.

She said some food hubs may help farmers find appropriate buyers, with technical assistance and producer development and bundling products into multi-farm CSAs or food boxes. It’s all about helping farms sell more.

“The cost of these services is generally factored into the margin,” Borgman said. “Every food hub is different but you’ll sell at a cost to that food hub and they’ll factor in a margin. Your price will need to be lower than for a direct sale.”

Food hubs may use the internet to do business, not just for brand awareness.

“Many have an online platform for buying online and some of the food hubs let you go in and create a profile to list your own products,” Borgman said. “It depends upon what hub you’re working with.” She said farmers with experience in selling wholesale may find it easier to sell to food hubs.

“Be ready to describe your customer pricing,” she said. The price should fall between direct sale and wholesale.

She also said farmers need to consider what they grow best and lead with that item. “Aim for a sweet spot of three to five crops with consistent supply and quality,” Borgman said. “Consider what can be succession planted and/or harvested multiple times.”

Farmers also need to consider customer relationships.

“They’re so critical,” Borgman said. “Depending upon the hub, they may be selling to some of your current customers. You may want to retain some of those direct relationships with current customers. Diversity in your marketing is where you have resiliency.”

Food safety can make or break a farm maintaining an agreement with a food hub.

“Some hubs might require you to have a written food safety plan or certification,” Borgman said. “Some may want to visit your farm. They want to see what you’re doing.”

She added that for many food hubs, liability insurance is required.

Before partnering with a food hub, Borgman said farmers need to learn how the food hub develops its brand, what the brand stands for, the value the brand offers customers and how the farm can integrate its brand into the food hub’s brand.

Farmers should also ask about packaging and labeling, delivery or pick-up, best means of communication and invoicing and payment expectations.

2020-04-29T15:45:31-05:00April 29, 2020|Grower, Grower East, Grower Midwest, Grower West|0 Comments

Leave A Comment