This document discusses regional food hubs and their role in aggregating, distributing, and marketing locally produced foods. It describes how food hubs help both farmers and buyers by expanding markets, providing distribution and marketing services, and reducing transaction costs. Food hubs have positive economic, social and environmental impacts by creating jobs, retaining agricultural jobs, and allowing farmers to receive a greater share of retail prices. However, food hubs also face challenges in balancing supply and demand, managing price sensitivity and growth, accessing capital, and other operational issues. The document provides examples of different food hub models and discusses strategies for achieving economic viability and overcoming common challenges.

1. 1Farm to School Summit June 2013
Local food distribution hubs

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Regional Food Hubs
•Regional Food Hubs
• Defining characteristics of a Regional Food Hub
•Carries out or coordinates the aggregation,
distribution, and marketing of primarily
locally/regionally produced foods from multiple
producers to multiple markets.
•Considers producers as valued business partners

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Regional Food Hubs
• Works closely with producers
• Uses product differentiation strategies to ensure that
producers get a good price for their products.
• Aims to be financially viable while also having positive
economic, social, and environmental impacts within their
communities
• “Food Hubs” without infrastructure
• Developed strategic partnerships with other supply chain actors who can
provide warehousing, processing, and distribution services.

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Regional food hubs
• How do they help farmers and ranchers?
• Expanded market and revenue options
• Good for farms that may need to sell beyond direct market channels, but lack
supply to effectively work with wholesale markets
• Distribution and Marketing services
• Good for farms who are unable to devote time and capital to distribution
infrastructure and wholesale market relationships.
• How do they help buyers?
• Wholesale buyers often find it too costly to purchase products directly from
numerous farms and prefer to reduce transaction costs by buying product
from distributors.

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Regional Food Hubs
• What are the impacts of food hubs?
• Economic Impacts
• Based on the 2011 National Food Hub Collaboration (NFHC) survey, food hubs
gross nearly $1 million in annual sales on average, with many showing double
and even triple digit annual sales growth
• Example: The Oklahoma Food Cooperative, which started in 2003 with 36
customers and $3,500 in sales in its first month of operation, now generates
about $70,000 in MONTHLY sales of products from approximately 200
producers.
• Job Creation
• From the survey: Food hubs create an average of 7 full-time jobs and 5 part-
time jobs.

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Regional Food hubs
• What are the impacts of food hubs?
• Retaining and Creating Other Agricultural Jobs and Businesses
• Offering producers an opportunity to capture higher value for their
products
•A recent USDA Economic Research Service report that studied five local
food supply chains found that producers in the local food supply chain
received a greater share of the retail price than they did from a
mainstream food supply chain, with producer net revenue per unit in local
chains ranging form roughly equal to more than seven times the price
received in mainstream chains.

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Regional Food hubs
• Other impacts of Regional Food Hubs:
• Community development
• Healthy Food Access

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Aggregation and Distribution
• Models and Examples
• Aggregation facilities with distribution
• Aggregation facilities without distribution
• Distribution/Marketing services without aggregation facilities
• Web-based aggregation

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Aggregation Facilities with Distribution

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Aggregation Facilities with Distribution

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Aggregation facilities without distribution

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Distribution/Marketing services without
aggregation facilities
Bayfield Regional Food Producers
Cooperative

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Web-based Aggregation

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Economic Viability OF Food Hubs
• Based on the profiles of food hubs interviewed
• Viability is not based on geographic location or type of legal
structure
• Median years of operation for economically viable food hubs was
9.5 years.
• Economically viable food hubs reported minimum gross sales of $1
million per year and median gross sales of $6 million per year.

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Economic Viability
• Investing in growth while supporting broader social
missions
• Many food hubs may be well positioned to carry out the core
aggregation and distribution functions without external subsidies,
they recognize that they need further support/partnerships if they
are to offer a variety of complementary producer and community
services.

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Challenges
• Balancing supply and demand
• Most of these food hubs are finding that the demand for locally
produced food is simply greater than their regions can supply,
especially within certain product categories
• Price Sensitivity
• While demand is there, many wholesale buyers resist paying more
from a food hub than they would from another distribution entity.
• Managing Growth
• Knowing when and how much to invest in infrastructure to keep up
with market demand

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Challenges
• Access to capital
• Not only for infrastructure investments, but also for securing short-
term revolving credit lines to maintain adequate cash flow for
payments.
• Other notable challenges
• Dependence on volunteer labor
• Finding reliable seasonal and part-time staff
• Food safety requirements
• Licensing and permit requirements
• Legal parameters of hub relationships

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Challenges
• Learning from a co-op closure
• Dissolution of Producers and Buyers Co-op holds lessons for
others pursuing institutional markets.
• By Margaret M. Bau, Co-op Development Specialist
• USDA Rural Development, Wisconsin
• Producers and Buyers Co-op
• It was a multi-stakeholder cooperative in which members
represented all aspects of the local food system: producers, local
processors, transport providers, and regional institutions. For three
years, the co-op coordinated the processing and delivery of locally
grown chicken, beef, cheese, pork, produce, fish, eggs, bison and
lamb to area hospitals.

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Challenges
• Producers and Buyers Co-op
• Lesson #1: Multiple Members are needed in each membership
class; don’t become identified as one member’s project.
• Lesson #2: Raise sufficient capital before launching; hire an
experienced manager
• Lesson #3: Require contracts between parties
• Lesson #4: Educate and train members at all levels

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Finding funds
•Funding Search Resources
•Got Moola – (Google “Got Moola DATCP”)
• Carl Rainey, 608-224-5139, carl.rainey@wi.gov
•Government Funds:
•Building Sustainable Farms, Ranches, and Communities -
https://attra.ncat.org/guide/
•
•Page 35 in the USDA Regional Food Hub Resource guide has
identified 30 grant and loan programs that could potentially
finance various aspects of food hubs

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Finding funds
• Foundations in Wisconsin -
http://www.wifoundations.org/ (Demo the online version
there)
• (414) 288-1515, Mary.Frenn@Marquette.edu
• Community/Social Investment opportunities
• Slow Money
• Community Investment Funds
• Selling stock

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Other Resources
• USDA AMS – Regional Food Hub Resource Guide
• Building Successful Food Hubs – A business Planning
Guide for Aggregating and Processing Local Food in
Illinois