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

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

Summary

Small- and mid-scale producers are exploring new distribution systems to aggregate their products with other producers. Some have established relationships with nonprofits, innovative retailers, food service companies or progressive distributors. Such values-based supply chains enable a producer’s values to be embedded into the supply chain and conveyed throughout the distribution system. Producers are considered to be partners, rather than merely suppliers of commodities, and they become price makers rather than price takers since the supply chain enables them to differentiate their products. The success of the venture depends on trust and cooperation among all the partners.

Our Western SARE-funded project expands on a two-year USDA NIFA-funded research project to explore the successful development of values-based supply chains in three 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 four California case studies in the NIFA project all focus on institutional buyers as the last entity in the chain. The funding from Western SARE allowed us to conduct a fifth case study that focuses on the supply chain anchored by a retailer as the last entity in the chain–the Sacramento Natural Food Coop, a grocery store in Sacramento California known for working with local growers using sustainable farming practices.

Objectives/Performance Targets

To assess the success of various values-based supply chains in the larger project, we began by conducting case studies of distribution networks. Our case studies examined established or emerging relationships between producers and other firms involved in the distribution networks of produce values-based supply chains. The four cases in California selling mainly to institutional buyers are identified by the primary distributor selling to institutions: Growers Collaborative (CAFF), Fresh Point LA (a subsidiary of Sysco), Greenleaf (SF) and Specialty Produce (San Diego). The fifth, funded by this Western SARE grant, profiles the values-based supply chain anchored by a retailer, the Sacramento Natural Food Coop.

For this case study, we have conducted interviews with distributors, suppliers (producers) to the network and with Sacramento Natural Food Coop staff. In addition, we have interviewed staff at a local community-based farm called Soil Born Farms that is integral to authenticating the values attached to some products moving through SNFC. Thus the entire supply chain is included.

A common interview protocol was created collectively by project team leaders and is currently being used to gather data for the original case studies as well as this one.

In each case study we pay particular attention to: access to financial capital, policy/regulatory/industry context (e.g., processing, food safety, insurance), and entrepreneurial (or business acumen) skills that have contributed to the overall development of the distribution network, strategic partnerships and to its success.

Accomplishments/Milestones

To be in line with the mission of Western SARE, we added a grower component to our existing Advisory Committee. Three growers were added to our advisory committee. Two other growers who agreed to be part of the project have opted out. All committee members were polled about the design and relevance of the interview tool. The active farmer members have agreed to serve as speakers during outreach events and to review the research results and outreach materials.

In consultation with our Advisory Committee, we modified our research tool and perspective to accommodate the differences between a supply chain ending in an institution and one ending at a retail store. In the case of the values-based supply chain ending at Sacramento Natural Food Coop, we discovered that the chain is much more of a network than a linear chain. In order to achieve the mutual benefit of authentic branding, the communication along this chain is much more transparent than in the other cases.

We conducted interviews in person and by telephone with nine participants in the retail supply chain; two distributors, three farmers and three retail staff. Each interview took about two hours with follow-up questions by telephone. The results were transcribed and inserted into a database that allowed us to analyze the data from a variety of perspectives.

We are in the process of writing up the case study, using data from the interviews. Once it is completed, we will share it with our Advisory Committee and solicit their feedback. This will be incorporated into the final report.

While the case report is not complete, outreach has begun. Several collaborators attended an event held in the Bay Area (Mills College) in May 2010 as part of the NIFA project called Scaling Up Local. They were among 50 invited guests and participated in the forum for industry leaders on moving high-volume food purchasing to the next level of sustainable, local sourcing.

Now that interviews are complete for the retail case, five representatives from our study will participate in a panel discussion about the project at an upcoming event scheduled just before the Ecological Farming Conference at Asilomar in January 2011, “Building Regional Food Systems: Regional Food Hubs and the California Food Hub Network.”

Results will also be presented by collaborators in this project at the California Small Farm Conference in San Jose on March 8. Supporting publications for these events will be prepared based on the research report.

Impacts and Contributions/Outcomes

Our project helps facilitate the development of new regional institutional and retail markets for growers specifically selling products using sustainable production practices. Products with these attributes are what consumers are increasingly demanding. The key is to create a distribution network in which those attributes (or “values”) are communicated to distributors and buyers all along the chain, all the way to the consumer. Consumers are willing to pay a premium for product with these values which then translates to higher prices for regional producers. In order for this to happen, consumers have to be aware of when and where their cafeterias and grocery stores are supplying these products and who the producers are.

Our educational and outreach strategies include training producers about creating and maintaining business strategies that access these new regional distribution networks. Regional markets will recirculate dollars locally. If stores, restaurants and cafeterias are showcasing the producers from whom they buy their food, farmers get the recognition they deserve for growing good food using sustainable farming practices.

Producers will be recognized (economically through sales and socially through branding) for their sustainable farming practices. Food safety practices will be encouraged as a precondition to access new channels for wholesale markets.

A core characteristic of values-based supply chains is a shift in the relationship between buyer and producer. It becomes more of a partnership, less adversarial and is marked by better communication between the parties. Buyers work with producers to open new markets for specialty products, find ways to add value, plan production schedules and develop new crops for niche markets. These activities increase diversification across both crops and enterprise models.

The research part of the NIFA project includes in-depth case studies to better understand the nature of these values-based supply chains including the regional, economic, social and environmental implications. The Western SARE funding for research and education about a values-based supply chain that ends in retail has enriched our understanding of how the farmer, distributor and retailer act together to impact consumer perceptions about food that comes with an authentic set of values attached. The entire project also (through the NIFA funding) includes surveys of financial institutions, regulators and economic/community development groups to better understand how these groups can help regional producers who seek to explore new distribution networks.

Collaborators: