On September 10th, 2015, over 35 people gathered at the Alderson Community Center for an Emerging and Early Stage Food Hub Development Workshop presented by the National Good Food Network. It was the culmination of a year’s worth of tours & trainings by an array of West Virginia food hubs in various stages of development.
The day-long training provided by The National Good Food Network in Alderson was extensive, covering the following topics:
This conundrum is defined as “Securing an adequate price for farmers and livable wages for workers while producing food environmentally sustainably, making good food affordable and widely available…and covering costs of operating!”
They said it best:
“There is no “one size fits all” or “best” tax structure, legal structure or operational model. What is best for your operation is based on your unique core values, mission, and success metrics. Some hubs with similar legal structures (c-corp, cooperative, s-corp, LLC, etc.) have vastly different OPERATIONS. While people often focus on what their legal organization will be, or which one is “best,” there are numerous examples of successful food hub entities that are legally organized in a variety of ways.”
Food hubs requires numerous roles to be filled. Sometimes, multiple roles are filled by one employee, which saves on staffing costs. This approach is evident in several food hubs in operation in the United States, and most of these entities have staff numbers in the single digits while maintaining sales of up to $3 million per year. In addition, full-time staff are frequently supplemented with both part-time seasonal labor as well as volunteer staff.
This is a big issue! Whether hub-directed or third party, food hubs should consider:
Know your farmers! View the food hub through the lens of the farmers or producers that may potentially be involved.
From a farmer’s perspective, what would the ideal food hub look like?
“Hubs often have a mission to help small, emerging farmers, but may also face pressure from buyers (who may want all of a certain product sourced from one larger farm rather than aggregated from several smaller ones) or from the need to streamline internal operations (move toward bigger more established farmers for efficiency or reliability purposes).
This is simply a reality of the tension between staying in business and the mission of the hub, and finding the right balance will help the hub serve its mission and be sustainable. Newer, smaller farmers need food hubs, may be more difficult to work with, and may take more handholding.”
A food hub’s operations are affected by two different regulatory agencies: FDA (Produce, Other Foods, often Facility), and the USDA (Meat, Poultry, Eggs). What about Food Safety? Read on:
“GAP, GGAP, GHP, GMP, etc:
Many of these are not mandatory from a legal perspective, but from a buyer/liability perspective may be required.
Regardless, they are increasingly important, and more and more frequently required by buyers.
Many of the food safety certifications provide more of a market entry point rather than obtaining a price premium or product differentiation for end-consumers. Often, the food safety identity is lost before reaching consumers.
The main point to consider is that while many of the safety certifications are not legally mandated, the market a food hub is focused on may require them.”
A food hub must know who they are selling to before you can figure out how to sell to them (design solid marketing strategies, activities, and materials).
“The food hub’s core values will typically define the markets the hub chooses; the market the hub chooses to focus on developing will drive how it conducts its marketing activities.
Example: A food hub would focus on different marketing activities and communicate different aspects of the food hub’s operations to a hospital versus a restaurant.”
Questions For Hubs:
- How do I build strong markets? (What buyers are available?)
- How do I coordinate the mission of my hub with my market?
- How do I ensure that my infrastructure suits my market?
- How do I ensure my production base suits my market?
- Do my marketing activities fit my market, mission, infrastructure, and production base?
There are numerous types of food hubs in existence. The three main operational business models presented-direct to consumer, wholesale (institutional), and hybrid-were chosen as examples because they are more widely used.
“Viability: When the food hub is able to generate enough profits and bolster it’s cash account to being able to prep for future growth. The study indicates a Wholesale operation reaches this point at $2.4 million in sales, Direct to Consumer requires at just under $567,000, and the Hybrid food hub needs sales of just over $3.2 million.
Overall, the sales levels for the Direct to Consumer model are well below the sales levels required in the wholesale or hybrid operational models. This is due to the fact that they will operate at the leanest point possible. They will receive produce, repack it for delivery, and send the boxes to the various drop off points with a just-in-time emphasis on inventory. Therefore, the food hub will need a smaller warehouse and a reduced amount of equipment, such as cooler space and intermittent labor vs. full time.”