As communities reconsider the importance of food to their economic well-being, independent farmers and food makers are increasingly focused on selling their products locally. The growth of farmers markets, CSAs, farmstands and the like all represent this New Food Economy. And yet even for all of the growth, local farmers continue to hit a wall when selling to larger wholesale customers. Americans spend more than $1 trillion on food, but less than one percent of our food budget is spent directly with farmers. There is a lot of money at stake in the wholesale arena. But the supply chain networks for grocers, hospitals, schools and restaurants are often more tuned into national and global food than what is seasonal and nearby.
That is starting to change. Small farmers are working together, cooperating on sales and delivery services, to create a more level playing field and open the door to wholesale opportunities. When these efforts involve multiple farms aggregating products in one place in order to make distribution more efficient, they are often labeled “food hubs.” The USDA counts hundreds of new food hubs starting up in various corners of the country. As more and more food hubs find success across the country, a set of best practices that can help guide a second wave of entrepreneurs and accelerate this localization of the wholesale food marketplace is emerging.
Most of the people launching these startups have little “traditional” food distribution experience. They are mission-driven and focused on keeping food dollars in their communities. Local Orbit has made its mark creating online marketplaces for local food distribution startups. In the process, the company is been in a unique position to work with entrepreneurs developing a wide variety of business models in 12 states. There are common bottlenecks that Local Orbit found were slowing down its customers:
1. Just Get Started: Don’t Wait on a Yearlong Feasibility Study
- You don’t need to have all of the answers today. You just need to have the right guiding questions to help you iterate towards a solid business model.
- Every region has a different food economy, so finding the right mix of growers, buyers and distribution logistics for your region may take some experimenting.
- Create a sales strategy and start going after customers. That’s the only way to understand what product demand will look like.
2. Keep Capital Costs Low: Don’t Go on a Spending Spree Before You Have Sales
- Start out with lower costs and increase your long-term flexibility. You might not know exactly how your business will grow.
- Consider cold storage facilities that have extra capacity or use a plug-in refrigerated truck to get started.
- Consider truck rental agencies or alliances with existing distributors, or find out if participating farmers have extra trucks.
3. Think Outside Your Box: Don’t Just Think of Your Own Operational Needs
- Map out the experience of farmers and customers to make sure you are serving them well.
- Build an operation around the customer experience. It will increase sales and keep customers and farmers loyal in the long-term.
The opportunity to re-link our local food chain has never been more possible than today. Technology can now level the playing field and open up new local markets for farmers and entrepreneurs.
Introducing ‘Hub Camps’
These considerations and many others are discussed at Local Orbit’s new trainings for local food entrepreneurs – called Hub Camps – a three-day intensive course that covers the nuts and bolts of starting and running a wholesale food distribution operation. Three of the events are slated for Michigan, California and New York this spring, with more being finalized for this fall. During Hub Camps, startups get immersive, hands-on learning and business development on growing their local food economy based on successful wholesale models from across the country. It is an action-oriented approach to learning, launching and adapting that is all about agile and iterative business planning. Startups walk away with a six-month action plan to get their distribution business off the ground. Local Orbit is also launching an online toolkit to provide interactive resources for entrepreneurs developing local food distribution ventures.
About the Author
Noah Fulmer is the Director of Hub Camps at Local Orbit. Previously, he was the co-founder and executive director of Farm Fresh Rhode Island, an organization that runs farmers markets, a processing kitchen and a wholesale food hub connecting 60 local producers to over 100 chefs, grocers, schools and institutions every week.
This post originally appeared on BALLE.