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Food Hubs: Issues, Opportunities, and Propositions for Practitioners

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This PowerPoint presentation was presented by James Matson and Richard Heiens at the International Management Development Association's 21st Annual World Business Conference in Helsinki Finland.

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Food Hubs: Issues, Opportunities, and Propositions for Practitioners

  1. 1. FOOD HUBS: ISSUES, OPPORTUNITIES, AND PROPOSITIONS FOR PRACTITIONERS Richard A. Heiens, University of South Carolina Aiken James Matson, Matson Consulting
  2. 2. WHAT MAKES THESE APPLES DIFFERENT? Presented July 8, 2012 - IMDA Helsinki, Finland
  3. 3. ANSWER:  One was sold at an American supermarket and went through the traditional distribution channel for produce. It probably travelled at least 1,800 miles from the farm to the consumer’s plate (25% farther today than in 1980- Halweil, 2002).  The other was sold through a developing local foods marketing channel. It only travelled 46 miles from farm to plate. Presented July 8, 2012 - IMDA Helsinki, Finland
  4. 4. INTRODUCTION  U.S. consumers are willing to pay a premium for local foods  Food hubs are a way for producers to find local markets  Food hubs are emerging as a solution for local food marketing in the United States Presented July 8, 2012 - IMDA Helsinki, Finland
  5. 5. LOCAL FOOD BUZZ  Last ten years have been transformative - Sales of organic foods in the U.S. tripled from 2000-2009 to almost $25 billion.  New consumer decisions to buy locally - Have led to multi-farm Community Supported Agriculture (CSA) programs, where small to medium sized farmers bundle their output to local markets.  Local food sales were estimated to have achieved $7 billion in 2011 (USDA‐ERS) Presented July 8, 2012 - IMDA Helsinki, Finland
  6. 6. WHAT IS A FOOD HUB? USDA’s working definition Vs Broader Definition of Food Hubs Presented July 8, 2012 - IMDA Helsinki, Finland
  7. 7. USDA DEFINITION OF A FOOD HUB “A business or organization that:  actively manages;  the aggregation, distribution, and marketing;  of source‐identified local or regional food products;  primarily sourced from small to mid‐sized producers  for delivery to retail, foodservice, and/or institutional buyers”. Presented July 8, 2012 - IMDA Helsinki, Finland
  8. 8. BROADER DEFINITION OF FOOD HUBS  Should be defined in terms of function rather than form: Some food hubs exist in a virtual context, transmitting information between buyers and sellers of local and regional food products. Many hubs evolved from an educational or social mission: striving to keep food dollars in the local economy keeping working agricultural lands in production Presented July 8, 2012 - IMDA Helsinki, Finland
  9. 9. FOOD HUB MATURITY Presented July 8, 2012 - IMDA Helsinki, Finland
  10. 10. THE VARYING FUNCTIONS OF FOOD HUBS  Market Access for Local Foods - Local consumers access to local producers  Information Flow and Sharing - Good Natured Family Farms  Transportation and Distribution - Costliest and most complicated aspects of operating a food hub  Brokerage Service - Traditional mid value chain role in food sales Presented July 8, 2012 - IMDA Helsinki, Finland
  11. 11. THE VARYING FUNCTIONS OF FOOD HUBS  Increasing Market Share by Bundling - Community Supported Agriculture (CSA)  Increasing Market Share by Extending the Season - Coordinating existing product lines  Maintaining a Consumer-Producer Connection - a two way informational marketing channel Presented July 8, 2012 - IMDA Helsinki, Finland
  12. 12. FOOD HUB PRODUCT OFFERINGS Presented July 8, 2012 - IMDA Helsinki, Finland
  13. 13. GROWTH OF U.S. FOOD HUBS Source: USDA AMS 45 47 51 54 65 73 82 101 117 133 145 162 10 30 50 70 90 110 130 150 170 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Growth in the Number of Food Hubs (2001-2011) Presented July 8, 2012 - IMDA Helsinki, Finland
  14. 14. U.S. FOOD HUB DISTRIBUTION Presented July 8, 2012 - IMDA Helsinki, Finland
  15. 15. CONSTRAINTS TO GROWTH OF FOOD HUBS  Capitalization  Liability - Tort risk and contract risk  Local Processing Capacity - Challenge of processing of meats  Human Resources Capacity - Business management Presented July 8, 2012 - IMDA Helsinki, Finland
  16. 16. BUSINESS STRUCTURE OF FOOD HUBS  The Evolving Non-profit Entity - E.g. Eastern Carolina Organics (ECO)  Cooperative Structured Food Hubs  For-Profit Food Hubs - E.g. Colorado Homestead Ranches (CHR)  Multi-Structured Food Hubs Presented July 8, 2012 - IMDA Helsinki, Finland
  17. 17. VIRTUAL FOOD HUB AS AN INFORMATION SOURCE  Creation of Networks and the Linking of Buyers - E.g. OmOrganics  Product Assurances - Assurances about product quality  Traceability - Point of origin Presented July 8, 2012 - IMDA Helsinki, Finland
  18. 18. ROADMAP FOR FOOD HUB DEVELOPMENT: PRINCIPLES AND PROPOSITIONS  Strategic plan with clear goals  Management oversight team has all stakeholders engaged  Understanding of different direct markets and how to access them Presented July 8, 2012 - IMDA Helsinki, Finland
  19. 19. ROADMAP FOR FOOD HUB DEVELOPMENT: PRINCIPLES AND PROPOSITIONS  An educational program may be part of the hub development  The hub may have to reduce risk on the buyer’s side to access markets  Capital is required for supply chain infrastructure Presented July 8, 2012 - IMDA Helsinki, Finland
  20. 20. ROADMAP FOR FOOD HUB DEVELOPMENT: PRINCIPLES AND PROPOSITIONS  No one type of business structure is best fit for food hubs  Efficient management of information is critical Legal Status of Food Hubs Presented July 8, 2012 - IMDA Helsinki, Finland
  21. 21. DEFINITIONS:  C corporation refers to any corporation that, under United States income tax law, is taxed separately from its owners. Any distribution from the earnings and profits of a C corporation is treated as dividend for U.S. tax purposes.  S corporations do not pay any federal income taxes. Instead, the corporation's income or losses are divided among its shareholders. The shareholders must then report the income or loss on their own individual income tax returns.  LLC is an unincorporated association and is not a corporation. Owners of the LLC are protected from some or all liability for acts and debts of the LLC. Presented July 8, 2012 - IMDA Helsinki, Finland
  22. 22. POTENTIAL FOOD HUB BENEFITS  Environmental benefits - Less transportation costs and less traffic congestion  Social benefits - Supplying schools with fresh foods  Economic benefits - Higher margins for farmers  Development of local human capital - Producer training and capacity building Presented July 8, 2012 - IMDA Helsinki, Finland
  23. 23. CONCLUSION  Conventional U.S. Food Marketing Chains are ill equipped to maintain the traceability of producer to consumer  Food Hubs serve to connect producers and buyers and maintain traceability as a value proposition Presented July 8, 2012 - IMDA Helsinki, Finland

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