Developing regional distribution networks to enhance farmer prosperity: Retail value chains

Project Overview

Project Type: Research and Education
Funds awarded in 2010: $24,906.00
Projected End Date: 12/31/2011
Region: Western
State: California
Principal Investigator:

Annual Reports


Not commodity specific


  • Education and Training: extension, networking, participatory research, workshop
  • Farm Business Management: new enterprise development, cooperatives, market study, value added
  • Sustainable Communities: local and regional food systems, new business opportunities, partnerships

    Proposal abstract:

    The ongoing restructuring in U.S. agriculture has posed a significant challenge for family farming operations as farms have struggled to compete in a global food economy. Recognizing that they cannot compete in commodity markets, many producers have turned to direct marketing methods to differentiate their products and capitalize on the burgeoning consumer demand for locally and sustainably produced foods. Recently, some producers have also sought access to institutional and retail markets, and have begun to sell to schools, colleges, hospitals and other institutional food service operations as well as grocery and retail outlets. In our recent research of the farm-to-college market, we have found that such institutional markets offer considerable sales volume potential to producers; however, many institutional foodservice buyers have specific buying requirements that are not feasible for smaller producers, such as year-round availability of certain products and availability of a broad range of items from a single supplier.
    To address these and other obstacles involved in direct sales to institutions, producers are exploring new distribution systems to aggregate their products with other producers while maintaining their differentiation. Some have established relationships with certification organizations, nonprofits and even some innovative retailers and food service companies. These relationships assure producers that information about their production methods, such as environmentally sound and/or community-oriented practices, stay with the product. Such values-based supply chains are labeled “value chains” because they enable a producer’s values to be embedded into the supply chain and conveyed throughout the distribution system (Stevenson and Pirog, 2008). Such value chain networks can enhance the sustainability of producers, in the broadest sense, by addressing their environmental, economic and social concerns through a focus on cooperation, to gain economies of scale in marketing services, efficiencies in common distribution activities and building food system communities.
    Producers are considered to be partners, rather than merely suppliers of commodities, and they become price makers rather than price takers since the value chain enables them to differentiate their products. The success of the venture depends on trust and cooperation; the partners--farmers, ranchers, packers, shippers, processors, distributors, retailers and food service operators--share information with each other about the financial returns they need to operate profitably, such that all members of the value chain are profitable.
    A value chain ensures that information about production methods and other attributes is retained throughout the distribution process to the consumer. Thus, a producer’s environmentally sound and/or community-oriented practices become part of the value chain and are conveyed throughout the distribution system. While conventional supply chains limit the concept of value to financial profitability, value chains expand the concept of value to also include environmental and social profitability.
    Our proposal expands on a two-year USDA NIFA funded research and outreach project (currently in its second year) to explore the successful development of values-based supply chains in 3 western states (CA, OR and CO), especially focusing on the impacts of (1) producers’ access to financial capital, (2) government regulations and policies, and (3) producers’ business acumen/entrepreneurship. The California case studies in the NIFA project all focus on institutional buyers. We propose here to add an additional case study that focuses on retail buyers as part of the supply chain. We would include outreach about the retail supply chain as part of our current outreach efforts and expand the outreach venues and products (additional workshops and educational products).
    The retail supply chain provides about half of every consumer’s annual food expenditure according to the ERS. As such, it is an important market that is also shifting to take into account increasing demand for local, sustainable foods. The distribution infrastructure and industry participants, however, differ from those in institutional markets. Retail professionals on our NIFA advisory committee suggest that farmers and retailers could both benefit from research that clarifies new distribution opportunities and outreach that brings all parties together to share information about how to forge new partnerships.

    Project objectives from proposal:

    WSARE funding would allow us to leverage an existing USDA NIFA values based supply chain study by conducting an additional California case study that includes a regional retail buyer (vs. an institutional or foodservice buyer) as part of the chain. To assess the success of various distribution networks, we have organized a two-phased research process. In the first phase, we are conducting case studies of distribution networks. Our case studies examine established or emerging relationships between producers and other firms involved in the distribution networks of a value chain. The four cases in California selling mainly to institutional buyers are: Growers Collaborative (CAFF), Fresh Point LA (a subsidiary of Sysco), Greenleaf (SF) and Specialty Produce (San Diego). WSARE would allow us to add the supply chain connected to the Sacramento Natural Food Coop, a grocery store in Sacramento California, known for working with local growers using sustainable farming practices.
    For this case study (as with the other supply chain cases), we will conduct 3-4 interviews with distributors, 5 interviews with suppliers (producers) to the network and 3-4 interviews with retail buyers, so we include the entire supply chain. A common interview protocol has been created collectively by project team leaders and is currently being used to gather data for the original case studies. We anticipate that the new growers on the advisory committee would review the protocol to make sure we also capture relevant information from the growers’ perspective.
    In each case study, we will pay particular attention to: (1) access to financial capital; (2) policy/regulatory/industry context (e.g., processing, food safety, insurance); and (3) entrepreneurial (or business acumen) skills that have contributed to the overall development of the distribution network, strategic partnerships and to its success. Responses from the producer interviewees can be summarized together to glean insights for this group in particular.
    Timeline: Summer 2010: Assembly producer advisory committee, meet, review protocols; interview case study participants, visits to sites.
    Fall 2010: Complete interviews, summarize results, vet with advisory committee, provide insights to Phase II survey; plan outreach venues.
    Winter 2011: Create outreach products, conduct 1-2 workshops, collect feedback
    Spring 2011: Create additional outreach products; conduct 1-2 workshops, collect feedback.

    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.