Demand for organic and local foods has grown sharply over the last decade. Since 2005, sales for local organic foods have grown by 250%. Studies show that U.S. consumers are willing to pay a premium if they better understand the origin of their food and whether their purchase contributes to the development of the local economy. However, despite the fact that sales of local agriculture is one of the fastest growing segments of the U.S. food system, it still accounts for only a small fraction of overall domestic food sales.
What is a food hub?
One of the main reasons for such an insufficient supply of locally grown food is the lack of distribution channels for moving local foods to mainstream markets. Attempts to resolve this problem promoted the creation of collaborative supply chains, known as food hubs.
As defined by the National Food Hub Collaboration, “a food hub is a business or organization that actively manages the aggregation, distribution, and marketing of source-identified food products primarily from local and regional producers in order to satisfy wholesale, retail, and institutional demand.” For producers, food hubs allow producers to sell directly to consumers without incurring the added costs of attending farmer’s markets. Accordingly, the number of food hubs has increased by 288% since 2007.
New marketing opportunities for producers
Food hubs developed as very localized businesses, which mainly focused on providing new marketing opportunities to small and mid-sized producers. Many local and regional producers recognize the positive role and benefits of these centers. They connect rural farmers, who wish to increase their operations or diversify their market channels, with large food retailers, institutions, schools, and other buyers. By offering a combination of production, distribution, and marketing services to smaller and mid-sized producers, food hubs give local producers the opportunity to enter new markets that previously would have been only marginally accessible.
Collaboration with food hubs can also be beneficial for larger producers. These hubs can provide large-scale food companies with product-differentiation strategies and marketing services that guarantee the highest price in the market place. Furthermore, food hubs decrease transaction costs by providing a single point of purchase for source-identified products from local and regional producers for wholesalers, distributors, retailers, and food-service buyers.
Finally, food hubs exhibit innovative business models that are financially viable and are capable of making a difference in the communities that they service. Thanks to food hubs, many improvised areas are enjoying unprecedented access to fresh, healthy produce. Food hubs are demonstrating remarkable sales performance, thereby improving local economies and creating new jobs in the food and agricultural sectors. In addition to the jobs food hubs indirectly create in the rest of the industry, the average food hub directly creates twelve new jobs.
As hubs grow, that number can increase to dozens if not hundreds of employees. Food hubs are providing important production, marketing, and enterprise development support to new and current producers striving to build the next generation of farmers and ranchers.
Connecting with the health-focused consumer
Even though food hubs are relatively new, they have demonstrated success in functioning as aggregators, processors, distributors, and marketers of locally grown food. In these roles, they provide a vital supply chain link for small and mid-sized farmers, enabling them to reach consumers that are interested in purchasing local and organic products.
Food hubs are also useful in presenting farmers and ranchers with new marketing opportunities that broaden the scope of their consumer market. Crafted with community goals, they can improve community food supply and enhance its economic development.