CNY Bounty: Strengthening Community through Enhancing Marketing and Distribution Opportunities for Farmers

Final Report for CNE10-080

Project Type: Sustainable Community Innovation
Funds awarded in 2010: $15,000.00
Projected End Date: 12/31/2011
Grant Recipient: Cornell Cooperative
Region: Northeast
State: New York
Project Leader:
Susan Parker
Cornell Cooperative Extension of Madison County
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Project Information

Summary:

With support from NESARE, Chenango-Madison Bounty completed its transition to CNY Bounty, including creating two legally incorporated entities (and LLC, CNY Bounty, and a 501c3, Central New York Bounty, that is the sole member/owner of the LLC). In addition, CNY Bounty dramatically increased its drop off sites throughout the County, including in underserved communities, and started doing home deliveries to customers throughout the eastern portion of the County. Unfortunately, due to problems with deliveries vehicles, CNY Bounty has not yet started to offer home delivery throughout the entire County.

Project Objectives:

On February 6, 2011, CNY Bounty temporarily stopped home deliveries (see outcomes and impacts section for more information), thus many of the performance targets are similar to the number submitted in the 2010 annual report.

1. Increase in total number of customers ordering from Onondaga County from 64 (as of November 1, 2009) to 250 by January 2011.

Throughout the project period (ending February 6, 2011, due to the Bounty’s temporary closure), 618 new customers from Onondaga County signed up to order from CNY Bounty. Out of this number, 298 placed orders, and 212 placed more than one order.

2. Increase in total number of Onondaga County customers ordering per week from 15 to 150 by January 2011.

The average number of orders per week in Onondaga County from September 1, 2010 to February 6, 2011 was 53.8, representing 37.1% of total orders, making it the County with the largest number of total orders.

3. Increase average order amount ($) of Onondaga County customers from $25 to $45.50

The average dollar amount per order in Onondaga County from September 1, 2010 to February 6, 2011 was $34.47. The amount continues to increase, but we have not yet reached our goal. We believe this has a lot to do with the number of drop sites in the County. When Bounty reopens in June, we anticipate having a minimum order amount required for drop sites.

4. Increase in the number of wholesale orders per week (i.e. sales to restaurants, grocery/natural food stores, etc.) from 2 (November 2009) to 8 by January 2011.

Though Bounty temporarily closed its home delivery site, it continues to offer delivery for wholesale accounts. Through the first 2.5 months of 2011, we have averaged over $2,500/week in wholesale deliveries to Hamilton College. In addition, we are in continued discussions with SUNY ESF/Syracuse University, Colgate University, and Cazenovia College. We are working to revise our business plan and anticipate that the wholesale portion of our business will continue to become more important.

5. Increase in the number of farms/processors from Onondaga County participating in the Bounty from 0 to 15 by January 2011

As of March 1, 2011, CNY Bounty is working with 9 Onondaga County growers. This number includes growers who are participating in the wholesale portion of CNY Bounty only. We found out this week that we received funding from National Grid to redo our website. We have been waiting for these funds before bringing on many more new producers. We have had several discussions with CCE Onondaga County and they will be working with Sue Parker (who is now a CCE Onondaga County employee) to coordinate an Onondaga County producer meeting in the near future.

6. Increase in the total number of farms/processors participating in the Bounty from 88 (November 2009) to 120 by January 2011.

As of March 1, 2011, there are 123 producers participating in CNY Bounty. Not all of these producers are listed on the website and as a few of the most recent farms that were added are participating in the wholesale distribution system only.

7. Improved farm profitability (to measure this we will establish baseline data of what each participating farm grossed through the Bounty in 2009 and compare it with 2010).

Please see attached chart – this chart includes producers who have participated in the Bounty for at least three years (including the grant period).

8. Increase in total gross Bounty revenue from $169,000 (estimated 2009) to $775,000 by 2012

Total gross revenue for 2010 was around $437,000. We will let you know how we do in 2011 and 2012.

9. The Bounty, with its easy-entry marketing and distribution system will facilitate the development of at least four value-added products using locally grown ingredients by December 2011

CNY Bounty works for 7 farms and processors who started in 2010. The majority of these farms told Sue Parker that had it not been for the marketing effort of CNY Bounty, they would have been more hesitant to expend the hefty amount of start-up capital that it took to get their various projects off the ground. One of the most exciting value-added success stories is Kriemhild Dairy Farms LLC. Kriemhild is made up of 4 dairy farm families in Madison County, NY (also facilitated in part through SARE funding). They produced their first trial of butter in 2010, and have marketed it predominantly through CNY Bounty in the fall 2010.

In terms of job creation, we are working on a survey that will be going out to all participating producers shortly. We have anecdotal evidence that participating producers either hired more employees and/or were able to have one or more family member work either part or full time on the farm. Until we receive the survey responses, we will be unable to provide concrete numbers for job creation as a result of the NESARE funding and CNY Bounty expansion. We will make this information available to NESARE as soon as it becomes available (we hope by the end of the summer).

Introduction:

Throughout the grant period, Susan Parker formed many new relationships with organizations and customers throughout Onondaga County. In particular, the Tri-Valley YMCAs (3 locations), Assemblyman Al Stirpe, Syracuse University, Cornell Cooperative Extension of Onondaga County, the Southside Innovation Center, the Gifford Foundation, and SUNY ESF, enabled a strong network of diverse community partners to support the transition from Chenango-Madison Bounty to CNY Bounty. These relationships facilitated continued increases in orders, and thus justified beginning home deliveries throughout the eastern portion of the County.

Cooperators

Click linked name(s) to expand
  • Steve Holzbaur
  • Becca Jablonski
  • Terry Mosher
  • Eve Ann Shwartz
  • Kirstin "Bee" Tolman
  • Anastasia Urtz

Research

Materials and methods:

In order to facilitate the expansion of Chenango-Madison Bounty to CNY Bounty, Sue Parker worked very closely with many community partners, including: the Tri-Valley YMCAs, Assemblyman Al Stirpe, SUNY ESF, Syracuse University, CCE Onondaga County, the Southside Innovation Center, and countless volunteer farmers, agri-business owners, and consumers. Without the support of these community organizations, expansion would not have been possible. We found that setting up drop sites was extremely labor intensive, and after negotiating with the drop off sites, Sue spent a substantial amount of time finding and coordinating volunteers who were willing to staff it. Sue also worked closely with interns who helped Sue to convene consumer stakeholder groups in Onondaga and Madison/Chenango counties and also to send out surveys. Through these efforts, CNY Bounty gleaned a significant amount of information about how to improve upon CNY Bounty’s efforts. In addition, Sue helped to convene farmer stakeholder group meetings. Farmers are very interested in hearing updates about the Bounty’s efforts – particularly in terms of expansion – and everyone was very happy about the expansion into Onondaga County.

Perhaps one of the most exciting things to emerge from the relationships with our community partners (and Assemblyman Al Stirpe and the Gifford Foundation specifically) was that when Al Stirpe introduced Michael Pollan at the Rosamond Gifford Lecture Series in October 2010 to a packed crowd of 2,000 people, he mentioned CNY Bounty on several occasions. In fact, Michael Pollan posed for a photo in front of the Bounty stand with Sue Parker and Jody Horsman (see attached).

Research results and discussion:

Over the past few months, CNY Bounty has had challenges with many aspects of the business, including: thousands of dollars in van repair and towing; collecting payments from customers (CNY Bounty still does not ; and website malfunctions. Business continues to grow, with new opportunities presented on a regular basis, but rather than focus efforts on continued expansion, Bounty staff and the Advisory Committee have spent a significant amount of effort addressing these issues.

CNY Bounty’s website has severe limitations. It has been crashing on a regular basis, does not work directly with Quickbooks, does not allow producers to view or enter their own information, cannot accept credit cards, etc. Transitioning to a new website is a top priority.

Cash flow continues to be a serious obstacle for CNY Bounty. We anticipate that the ability to accept credit card payments will help to alleviate this issue somewhat but this will be an issue on which the Board will need to spend some effort.

Additionally, the project coordinator stepped down as operations manager at the end of January to take on more of a planning and strategizing role for Bounty. After careful consideration, CNY Bounty’s Advisory Committee decided to take a temporary break from home delivery, beginning February 6, 2011, in order to focus its efforts on: 1) business planning and expansion; 2) creating a new website that includes better back-end functionality, better customer usability, a producer log-in area, and the ability to accept credit card payments; 3) purchasing new refrigerated delivery vehicles. We believe this is an exciting time for the project and Bounty will begin home deliveries again on June 1, 2011. In the short term, CNY Bounty continues to distribute a limited product selection to Hamilton College.

Participation Summary

Education & Outreach Activities and Participation Summary

Participation Summary:

Education/outreach description:

Community Talks/Presentations

• Caz. Cares Cazenovia NY, 5/3
• Bouckville Chamber Bouckville NY, 4/3
• Chittenango Rotary Chittenango NY, 6/9
• Lorenzo Driving Competition Cazenovia NY, 7/17
• Onieda Chamber Oneida NY, 7/20
• Community Action Program Retreat Hamilton NY, 8/13
• Nature Thyme DeWitt NY, 8/21
• Michael Pollan Event Syracuse NY Syracuse NY, 10/5
• Peterboro Historical Society Peterboro NY, 10/15
• Fayetteville Free Library Fayetteville NY
Doubletree Hotel Syracuse NY
• Chenango County Farmland Protection Norwich NY
• SUNY Morrisville Morrisville NY, 11/1
• Delta Gamma International Hamilton NY, 11/12
• Strategic Marketing Conference Hudson NY, 12/1-12/2

Displays
• New Woodstock Library month long display, 6/2-6/29
• Oneida Health Care display, 3/24-6/21
• Fayetteville YMCA
• North Area YMCA
• The Spring Fayetteville NY

Producer Meetings
Consumer Meetings

In addition to the above, an academic article was written and submitted to the pier-reviewed Journal of Agriculture, Food Systems, and Community development, which is focused on the “practice and applied research interests of agriculture and food systems development professionals and scholars.”

Media Outreach:

Highight on former Assemblyman Al Stirpe's homepage: http://assembly.state.ny.us/member_files/121/20100225/

Expansion into Onondaga County- Video Clip http://www.clipsyndicate.com/video/play/1902411/bridge_street_cny_bounty_3_22_10

WCNY Connected- Video Clip http://www.youtube.com/watch?v=uupPTzgpo54

Central NY YNN- Video Clip http://centralny.ynn.com/content/story_links/509029/cny-bounty-program-offered-in-syracuse/

Project Outcomes

Project outcomes:

CNY Bounty has created two independent entities in the past few months and is now utilizing an innovative legal structure – we have completely separate ourselves from Cornell Cooperative Extension of Madison County. CNY Bounty formed the LLC in October, 2010. The LLC is owned by the not-for-profit (501c3) that was created in February, but has not yet filed paperwork for the IRS to get approved for tax-exempt status. While the 501c3 status is processing, CNY Bounty created and is operating as an independent for-profit LLC, called: CNY Bounty, LLC.

In the upcoming weeks and months, the goal is to sell off the majority of the LLC to investors. We anticipate that the not-for-profit will continue to own a portion of the LLC, thereby ensuring that CNY Bounty continues to carry out its mission. There is a portion of what CNY Bounty does that clearly falls under the realm of a not-for-profit, including: incorporating beginning, expanding, and small-to-very small producers; linking Bounty with customers in need, such as homebound or those with low mobility and low income households; promoting local products generally throughout our region; ensuring CNY Bounty producers understand food safety regulations; and working with other organizations that are interested in the Bounty model.

CNY Bounty has now created its governing Board of Directors. They are charged with the oversight of the not-for-profit organization.

Assessment of Project Approach and Areas of Further Study:

Potential Contributions

This case study furthers the May 2010 research agenda proposed by the Agriculture of the Middle Project, a five-year-old national initiative of prominent researchers “addressing the problem of the disproportionate disappearance of midsize farms and ranches in the US, and the markets and infrastructure needed to maintain their viability” (Clancy, 2010, 2). Specifically, this case study furthers research on value chains, one of their four target areas. The initiative calls for: “conduct[ing] more case studies/evaluations of marketing systems including wholesale and retail sourcing, markups throughout the supply chain, short supply chains, margins for distributors who aggregate products from small-scale producers” (Clancy, 2010, 3).

In addition to the need for further food value chain research, there has been increased attention to the growth of home delivery services in food markets. The expansion of the e-commerce sector has changed the way many consumers purchase goods and services, even in traditional face-to-face transactions such as the ones seen in food markets. The development of unconventional shopping services via the Internet has opened the doors for producers to interact directly with customers without the need of wholesale food retailers. However, online grocery services are still dominated by large retailers (MarketResearch.com, 2011). Since CNY Bounty entered the market in 2007, there are now roughly 20 local foods distribution systems proposed and in development in the State. We believe that the successes and failures of CNY Bounty will help to further these burgeoning businesses.

Future Recommendations

Despite the successes of CNY Bounty, it is still not covering all of its expenses. In the current model, though CNY Bounty owns two-refrigerated vehicles, rents warehouse space, and has staff capacity, it is only making deliveries two-days per week. CNY Bounty wants to prove that appropriately scaled distribution systems can be economically viable and sustainable, as its presence has the potential to create, support, and sustain hundreds of regional farms and processors. As there are not similar models to which to turn, the Bounty needs research done on ways to diversify its business so as to enhance the competitiveness of small and medium scale agriculture. We requested funding from National Grid to hire a researcher to review the following:

I. Update Current Financial Model and Key Indicators

Since the Bounty is a program of Cornell Cooperative Extension of Madison County (although it is in the process of transitioning to its own entity) it has one cost center and one profit center: 1) Cost - general and administrative paid through the extension and 2) Profit – sales and all direct costs related to processing and delivery of orders. Each is accounted under a separate accounting system. While the profit center is nearing break-even cash flow, The Bounty continues to generate negative cash flow from the total operation. This figure is not available on demand. The Bounty needs to consolidate the accounting to project future cash needs into 2011.

It is also necessary to update several key indicators (since the 2009 completion of the original CNY Bounty business plan) such as cost per drop, customer retention, customer density, etc… to assist management in determining new strategies to increase the customer base, generate more business per customer and improve gross margins in support of generating break-even operating cash flow from the program by 2012 as originally set in 2009.

II. Planning for New Growth Initiatives

The Bounty management has identified several additional sales channels that either are or have the potential to use our existing infrastructure and available capacity. Following is a brief list of each initiative and their associated planning needs.

1. Develop Existing and New Wholesale Markets

The Bounty has identified several promising institutional customers. Due to our success generating significant new business with Hamilton College, we believe this sales channel will be an important driver of future growth for the Bounty. In particular, there is a new market opening up in close proximity to Armory Square in Syracuse that has requested CNY Bounty be its local foods purveyor. We need to plan our sales and marketing strategy and tactics for these customers. We also need to model the financials needs for this business as well as project future cash flows. This sales channel will need significant cash to support the balance sheet for rapid growth.

2. Develop New Marketing Strategies for Existing Home Delivery Business

While this business continues to grow, we believe that we have not nearly tapped the potential customers in the region we currently serve. Funds will be use to further develop our marketing strategy and tactics to generate new customers and increase sales per order.

3. Explore Feasibility of Mobile Markets and Cash and Carry Retail

The Bounty has the ability to sell more fresh, local foods in areas with limited access to these items either by setting up temporary cash and carry retail outlets or selling off of our delivery truck. Planning is needed to determine potential sales and associated costs and operating procedures as well as any additional start-up costs. There are two organizations that have attempted this model in Syracuse, but neither have looked as a diversification opportunity, or a for-profit way to support local farm businesses. Rather, the organizations have serviced “under-served” communities as a philanthropic gesture. Unfortunately from this lense the project is unsustainable.

4. Explore Feasibility of Warehousing and Distribution for Bounty Products and Other
Distributors

Broad line specialty distributors like Regional Access have many low volume customers and suppliers that result in high last mile costs. The Bounty, with smaller more efficient vehicles and better last mile drop density, has an opportunity to collaborate with the specialty broad line distributors to provide last mile freight and distribution services. The feasibility of providing this service needs to be determined.

5. Explore Feasibility of Supplying Large Urban CSAs

New York City has many very large CSAs organized through cooperative apartment associations, neighborhood associations, businesses, etc…. The Bounty would like to explore the feasibility of servicing these CSAs and determine if on-demand ordering would work for this potential sales channel. Particularly as the demand for local food has increased in NYC (as evidenced by the exponential expansion of regional farmers “green” markets), there are many opportunities presented to CNY agri-businesses through better access to this market.

In addition to the above mentioned research needs, CNY Bounty is also seeking funding from National Grid and the Center for Agricultural Development and Entrepreneurship to develop the complex web-based management tool that will facilitate the distribution system’s diversification. CNY Bounty staff have done a significant amount of research regarding available web tools, and have not found something that would meet its needs. If successful in this endeavor, the web-based tool will provide the opportunity for substantial project expansion, and thus serve to increase the competitiveness of producers throughout the region.

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.