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.

1. FOOD HUBS: ISSUES, OPPORTUNITIES,
AND PROPOSITIONS FOR PRACTITIONERS
Richard A. Heiens, University of South
Carolina Aiken
James Matson, Matson Consulting

2. WHAT MAKES THESE APPLES DIFFERENT?
Presented July 8, 2012 - IMDA Helsinki, Finland

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. 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. 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. WHAT IS A FOOD HUB?
USDA’s working definition
Vs
Broader Definition of Food Hubs
Presented July 8, 2012 - IMDA Helsinki, Finland

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. 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. FOOD HUB MATURITY
Presented July 8, 2012 - IMDA Helsinki, Finland

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. 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. FOOD HUB PRODUCT OFFERINGS
Presented July 8, 2012 - IMDA Helsinki, Finland

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. U.S. FOOD HUB DISTRIBUTION
Presented July 8, 2012 - IMDA Helsinki, Finland

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. 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. 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. 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. 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. 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. 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. 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. 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