National Good Food Network Seminar August 15: Pathways to Food Hub Success

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The National Good Food Network recently hosted a seminar on Financial Benchmark Metrics and Measurements for Regional Food Hubs last week, and it’s well worth viewing ( NGFN seminar).

The seminar discussed the results from the first detailed financial benchmarking study attempted of regional food hubs in the USA. The research arose out of a recognition that huge gaps of knowledge and detail exist in the financial operations and sustainability of the burgeoning local food sector, and of local food hubs in particular.

Hence the research team were honing in on the two big questions that are always in the back of my mind when looking at regional food hub operations internationally and contemplating what is developing here in Australia:

1.   Are food hubs economically sustainable?

2.    Can food hubs do well by doing good?

Hubs volunteered to participate, and the final research and benchmark figures are compiled from a total of 15 Hubs.

The first big challenge in pulling together the study was to establish what indicators should be measured to enable a comprehensive understanding of how these food hubs work. Measurement and evaluation of local food systems requires a completely different approach to that traditionally used by the USDA and other agencies in measuring food and farming financial performances.  Erin Pirro, one of the seminar presenters, discussed how Local Food Systems requires measures that track sales, distribution, destination, quality and etc. chart the full flow of products through the local food system, and where the costs and profits are occurring.

Once this matrix was established the study than aimed to:

-Recognize the different models of hubs

-Compare Food Hub performance across business models

-Provide a snapshot of the sector from a financial standpoint (both big picture and detailed info)

-Visualize the capacity of the sector.

The study only looked at 2012 financial records, and canvassed a diverse range of product mixes and revenue streams across the 15 food hubs.

What did they find?

Average Age of the Hubs: 11 years

Average Annual Revenue: $1.65 million

And, as always, the definition of ‘local’ varied between hubs in terms of from how far afield they sourced their products.

Average sourcing distance: 521 miles

20% hubs in the study = strictly organic

27% grow some of their own product on hub-operated farms

33% buy from own incubator farmers (to get an idea of a Food Hub that is operating with a farm incubation arm take a look at the Intervale Food Hub in Vermont).

53% = Not for Profit status

Interestingly, very little sales from the hubs studied came from in house processing (<1%) while from value add products it was slightly more (4%). Erin Pirro mentioned the value add lines in particular could be a good gap for hubs to focus in on in terms of raising margins, and an easier way in than in house processing initially.

So how are these US Food Hubs making their money?

The breakdown of revenue of the food hubs studied averaged out as below:

-84% from product sales (buying and reselling)

9% from grants and contributions

6% from other enterprises such as leasing out the delivery fleet during quiet periods/off peak times.

<1% from delivery and trucking (Interestingly only 2 of the hubs that were studied charged enough for delivery to pay for the costs incurred i.e. labor).

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Who’s buying from Regional Food Hubs?

food hub customers table

The seminar discusses that across the Hubs studied there was a concentration of customers: average number of customers per Hub rounded out at 326, with product sales to largest customers comprising on average 19% of sales.

This underscores the importance of relationships with customers in the operations of Regional Food Hubs, not only in line with local food/community values but also as vital risk mitigation in terms of the survival and sustainability of the regional food hub businesses.

I won’t throw any further numbers at you – but the slides with all the data are available as a pdf.

The key conclusion from the seminar is that the benchmarking study found that Regional Food Hubs can be sustainable, and that further detailed financial benchmarking and study is required to track the growth of this emerging sector, but also to provide potential investors, entrepreneurs, farmers and businesses with hard economic data to back up the good news stories and warm, homey glow of a re-localising food network.

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