A Guide for Scaling Up

Food Hubs
May 2014

Prepared by:
Emily Dimiero & Christa Mayfield

Support for this project was provided by USDA Federal

State Marketing Improvement Program and Massachusetts
Department of Agricultural Resources.

New Entry Sustainable Farming Project is a program of:

Table of Contents
Introduction .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................................................................. . . . . . . . . . . . . . 2

Purpose .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................................................................. . . . . . . . . . . . . . 2

World PEAS Food Hub and Key Informants . . .................................................................. . . . . . . . . . . . . . 3

Business Models and Legal Status . . . . . . . . . . . . . . . .................................................................. . . . . . . . . . . . . . 5

Relationships .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................................................................. . . . . . . . . . . . . . 9

Funding .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................................................................. . . . . . . . . . . . . 10

Managing Supply and Demand . . . . . . . . . . . . . . . . . .................................................................. . . . . . . . . . . . . 12

Business Processes and Strategies . . . . . . . . . . . . . . ................................................................... . . . . . . . . . . . 16

Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................................................................. . . . . . . . . . . . . 22

Other Resources .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................................................................. . . . . . . . . . . . 23

Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................................................................. . . . . . . . . . . . 24

1
Introduction
Food hubs are responding to two opposing trends in the
U.S. food system. Consumers are becoming increasing-
ly interested in knowing where and how their food was
grown, processed, and marketed, and they want to sup-
port smaller scale, local farms. At the same time, small
and mid-scale farms are declining in number, making it
difficult for these farmers to find marketing opportunities
at a scale and price that enables them to stay viable (Ler-
man, 2012). Direct-to-consumer channels are limited in
the volume of products they can move and have difficulty
achieving economies of scale. Even wholesale customers,
like restaurant chefs, who are committed to supporting the local food economy may find that the benefits of sourcing
locally do not outweigh the time and frustration involved in identifying and managing multiple vendor accounts, as
well as the risk of facing stock-outs (Clark et al., 2011).
The USDA defines a regional food hub as a business or organization that actively manages the aggregation, distri-
bution and marketing of source-identified food products primarily from local and regional producers to strengthen
their ability to satisfy wholesale, retail, and institutional demand (Fischer et al. 2013). Wholesome Wave further goes
on to define a healthy food hub, which “consists of a variety of fully integrated businesses, social services, and safe
public spaces that mutually support each other in ways that leverage profitability and long-term sustainability in
innovative ways.” (Bragg & Barham, 2010).
The Wallace Center at Winrock International and the Michigan State University Center for Regional Food Systems
released the results of its 2013 National Food Hub Survey in 2013. Among the survey’s 106 respondents, 62 percent
of the food hubs represented began operations in the last five years, and about one-third had been in operation for
two years or fewer. The wide range of reported 2012 revenues indicate the diversity of the respondents; the medi-
an revenue (sales income plus outside funding) ranged from $1,500 to $75 million, with a median of $450,000.
However, revenue was significantly correlated with years in operation; 10 of the 33 hubs in operations for 0-2 years
had revenue of $100,000 or less. Similarly, gross sales varied widely, with a median of $324,500 and a range from
$3,206 to $75 million (Fischer et al., 2013).

Purpose
A Guide for Scaling Up Food Hubs is intended to provide food hub leadership and staff with knowledge and tools to
develop a successful strategy for expanding operations and increasing sales growth. The broad USDA definition of
food hub encompasses a great diversity of organizations, including non-profit organizations and for-profit enterpris-
es, ranging in scale from single-producer Community Supported Agriculture (CSA) models to regional distribution
networks of producers and buyers, with a variety of missions. Including the many types of organizations under one
umbrella is useful because it allows diverse organizations to participate in a greater movement to develop resil-
ient regional food systems and allows them to benefit from resources developed by organizations like the Wallace
Center’s National Good Food Network and Wholesome Wave. At the same time, although food hubs might share
common goals, what determines a food hub’s model and level of success is ultimately location-dependent (Marsden
2012). This guide documents lessons learned from the food hub literature and experience gathered in key informant
interviews with management staff at selected food hubs in New England. While these lessons will help food hub
leaders weigh their options and develop their own marketing strategies for scaling up, there is not (and should not
be) a one-size-fits-many template (Blay-Palmer et al., 2013).
2
World PEAS Food Hub and
Key Informants

This guide is the result of collaboration between New Entry Sustainable Farming Project’s World PEAS
Food Hub and students at the Tufts University Friedman School of Nutrition Science & Policy. In 2013,
New Entry won a Federal State Marketing Improvement Program (FSMIP) grant, co-funded by the
USDA’s Agricultural Marketing Service and the Massachusetts Department of Agriculture. One of the
grant objectives is to develop a guide to scaling up a food hub business plan based on a case study of
World PEAS and other food hub models.

In preparing this guide, the authors reached out to nine food hubs in the New England region, of which
three were willing to be interviewed. The purpose of these interviews was to gain a deeper understand-
ing of what strategies successful food hubs employed as they were scaling up their operations. Key les-
sons gleaned from these interviews are featured throughout this guide.

World PEAS Food Hub

World PEAS Food Hub is a program managed by the New Entry Sustainable Project,
non-profit partnership of Tufts Univeristy and Community Teamwork, Inc. based in
Lowell, MA. World PEAS was established in 2005 to expand marketing opportunities for
graduates of the project’s Farm Business Planning Course, most of whom are under-re-
sourced and beginning farmers. Over the past nine years, World PEAS has matured into
a full-service food hub, with the large majority of its sales coming from its self-operated CSA program.
Since 2005, the food hub’s annual gross sales grew from $7,000 to over $300,000 by 2012. In addition
to providing marketing services to farmers, World PEAS has a mission to improve access to healthy,
culturally preferable foods among low-income households. This differentiates its operational structure
from that of more market-oriented food hubs in New England and elsewhere, which may respond more
directly to market signals.

Red Tomato
Red Tomato is a 501c3 non-profit food hub based in Plainville, MA whose mission is
to connect farmers and consumers through marketing, trade, and education. Founded
in 1996, Red Tomato originally functioned as a small-scale warehouse and distribution

3
operation that marketed and sold local and regional products to retailers. In 2002, the organization
divested its assets and shifted to a model in which it manages logistics through a network of farmers,
independent truckers, and wholesale partners. Red Tomato now markets produce for a network of
over 40 farms and apple orchards, selling to over 200 retail stores in New England, New York, and the
mid-Atlantic region, reaching $4.1 million in annual revenues in 2012 (redtomato.org/ourhistory.php).

Black River Produce

Black River Produce is a for-profit wholesale distributor based in North Springfield, VT.
Although they operate on a much larger scale than a more traditional food hub, Laura
Edwards Orr at Red Tomato identified them as an example of a for-profit company that
operates according to the ethical values that drive food hubs (L. Edwards Orr, person-
al communication, April 9, 2014). When Steve Birge and Mark Curran founded Black
River Produce in the 1970s, their idea was to fill what was then a significant gap in the local market by
bringing a supply of high-quality local fruits and vegetables to consumers. The business got its start
with Mark and Steve driving their van down to the Boston wholesale market while stopping at farms in
southern Vermont on the way to fill up the van. Local chefs spread the word and within a year, they were
supplying more than 30 restaurants. Today, Black River Produce supplies more than 2,000 wholesale
customers in Vermont, New Hampshire, New York, and Massachusetts. In addition to produce, the
business has expanded to include fresh and frozen seafood, locally processed meats, and cut flowers
(http://www.blackriverproduce.com/about.html).

Farm Fresh Rhode Island

Farm Fresh Rhode Island is a 501c3 non-profit, founded in 2004 with a mission to grow
a local food system that values the environment, health and quality of life of Rhode Is-
land farmers and eaters. Its objectives include preserving farmland and agricultural and
culinary knowledge, building healthier communities, increasing access to fresh food, im-
proving the impact of food production on the environment, and strengthening commu-
nity-based businesses (farmfreshri.org/about/about.php). Farm Fresh RI was born out of a project by
a Brown University student and started with trying to connect local farmers and local eaters through
a its Local Food Guide. Out of that effort, the organization expanded its programming to include sea-
sonal and year-round farmers markets, pooled farm-to-business delivery through Market Mobile, and
partnerships with the Rhode Island Department of Health and Division of Agriculture to expand access
to fruits and vegetables to seniors and participants of the Special Supplemental Nutrition Program for
Women, Infants, and Children (WIC) and the Supplemental Nutrition Assistance Program (SNAP) (J.
Rye, personal communication, April 29, 2014). Farm Fresh RI brought in $1.11 in revenues in 2012,
which included private and government grants (43 percent), fees retained for product sales, distribu-
tion services and market rental fees (46 percent), and individual donations (11 percent) (http://www.
farmfreshri.org/about/docs/2012review.pdf).

4
Legal Status and Market Segment
Aside from legal business status, food hub busi-
Business Models ness models differ according to the market seg-
ments they serve. The CSA model is one example
Legal Status of a direct-to-consumer marketing strategy, and
is the primary source of revenue for World PEAS
Food hubs have diverse business structures, but
Food Hub. But direct marketing to consumers
overall the three most typical models are non-profit
extends beyond individuals CSA subscriptions.
organizations, for-profit businesses, and cooper-
Food hubs may look to partner with corporate
atives. Food hubs that are just starting up should
wellness programs that encourage employees
define their structure according to what best fits
to sign up for shares. Food hubs also bring local
their particular mission, objectives, market condi-
food into the wholesale supply chain; the Wallace
tions, local food environment, growing capacity,
Center found that 33 percent of food hubs in the
existing infrastructure, financial resources, and the
U.S. are farm-to-business operations that sell lo-
capacity of its stakeholders (Lerman et al., 2012).
cal food to grocery retail markets, and 28 percent
A food hub’s legal business structure defines its tax
are hybrid food hubs that supply both wholesale
liability, general approach to risk management, and
and farm-to-consumer markets (Cantrell et al.,
liability exposure (Thompson & Hayenga, 2008).
2014). Food hub managers looking to expand
Non-profits have tax-exempt status and coopera-
their business should first use Wholesome Wave’s
tives can deduct patronage refunds to its members
Competitor Comparison Chart and Market Sizing
from taxable income (Baarda, 2007). According to
and Segmentation Sales Pipeline tools to assess
a USDA analysis published in April 2012, out of 184
their market position and to determine the best
projects surveyed, 28 percent were non-profit, 19
marketing strategy (wholesomewave.org/hfci).
percent were cooperatives, and 53 percent were clas-
One strategy would be through market pene-
sified as “other”, which included buying clubs, direct
tration, in which case the food hub would try to
farm sales, multi-farm CSAs, box delivery projects,
achieve growth with existing products within its
virtual farmers’ markets, and institutional buying
existing customer base, either through addition-
connections (Blay-Palmer 2013).
al marketing or more assertive sales efforts. By
5
contrast, a market development strategy would “middlemen”, linking producers to customers
involve targeting multiple new market segments while retaining a minimal margin to cover their
with its existing products (e.g., direct-to-consum- administrative costs. Amanda Osborne, director
er CSA shares, local restaurants, and local uni- of Ecotrust’s FoodHub, challenged this assump-
versities) (http://www.quickmba.com/strategy/ tion, pointing out that food hubs “are competing
matrix/ansoff/). in one of the world’s most cutthroat businesses,
which often operates on net margins of less than
Non-Profits 1 percent, and they are trying to return more
money to the farmers, operate on smaller scales,
Non-profit organizations are tax-exempt, can and provide additional social and environmen-
apply for grants from government donors, foun- tal services…the reality is that there is no way
dations, and can also accept tax-deductible char- to challenge the economies of scale of industrial
itable donations from individuals or groups. An food production, which is propped up by subsi-
organization may elect non-profit status if their dies, kickbacks, and money-saving environmental
model places more emphasis on their social shortcuts” (Jacobsen 2013).
values over profitability (Matson et al., 2013).
Non-profit food hubs tend to incorporate one or If a non-profit food hub wants to address both
all of the following motivations in their mission: goals (fair income and food access) while achiev-
ing a certain level of financial self-reliance, the
• Economic resilience: increasing incomes organization could maintain separate project
and expanding marketing options for budgets for each enterprise or activity. For exam-
local farmers; ple, Farm Fresh RI has eight or nine activity bud-
gets to accurately track its projects (J. Rye). This
• Ecological resilience: promoting
allows the organization to set a goal to achieve
agro-ecologically sustainable production
self-sufficiency of its trade business and provides
practices; and
• Social justice and food security: in-
creasing access to fresh fruits and veg-
etables among low-income consumers
(Blay-Palmer 2013).
Most organizations focus more on one of these
objectives than others (Mount et al., 2013). For
example, the Toronto Food Strategy and Toron-
to Food Policy Council prioritize social justice
and food access (Fridman & Lenters, 2013). In
fewer cases, organizations attempt to keep all
three issues in balance. An example is Just Food
Ottawa, which “works to promote a vibrant, just
and sustainable food system” and whose objec-
tives include expanding food access, improving
ecological sustainability, providing sustainable
livelihoods for producers, and encouraging local
citizens to be actively engaged in the food system
and food-related decision-making processes (Bal-
lamingie & Walker, 2013).

Social justice-motivated hubs may see their

organizations as cutting out profit maximizing

6
a tool to measure progress towards that goal. In “I think being a nonprofit sometimes makes
this example, self-sufficiency is achieved when the us more risk averse. Because all of our de-
commission retained from sales exceeds the cost cisions are vetted through our board of di-
of maintaining the trade business. Depending on rectors, it’s never just one person with an
the model, this could include marketing, admin- entrepreneurial idea that’s going to make
istration, and warehousing and distribution costs. something happen, it’s always something
Maintaining separate profit and loss statements that’s very thought out on a team level and
for each activity allows a successful non-profit on an organizational level, and in terms of
organization like Red Tomato to demonstrate its risk, we actually try not to assume much
legitimacy as a self-sustaining trade operation, risk because [a lot of] the funding that we’re
while still allowing it to pursue philanthropic sup- working with…is restricted.”
port to achieve its food justice goals (L. Edwards – Jesse Rye, Farm Fresh Rhode Island
Orr). In years when trade income exceeds oper-
ations costs, the excess funds can be reinvested
into the organization’s community development
efforts or as capital investment. In years when
trade income falls short, such as in years of in-
vesting in additional staff or capital, the organiza-
tion can use grant funding to cover the difference.

Non-profit distribution enterprises that rely on

grant funding for their operations may face some
challenging questions related to long-term goals
and economic viability (Day-Farnsworth et al.,
2009). However, non-profits who can successful-
ly obtain funding may enjoy the flexibility to take
risks:
For-Profits
“We’re constantly trying to innovate, stay at
the front of the market, and push the limits Among respondents to the 2013 Food Hub Sur-
of our organization, and work not only as a vey, forty-seven were for-profit businesses, but
successful trading organization but also as a more than half of food hubs that opened in the
learning laboratory around our core purpose last two years were for-profit (Fischer et al.,
and our core values. There’s a lot that we 2013). The survey analysis found significant cor-
undertake that might not work in the mar- relation between operating structure and reliance
ketplace, we have funders who are behind on grants; 69 percent of for-profit hubs reported
us because they want to learn what we can they were not reliant on outside funding. There
learn given our position in the market, and seems to be a shared sentiment among for-profit
there’s so much to know and to learn that food hubs that relying on grants is equivalent to
we wouldn’t necessarily want to be limited lacking economic viability and longevity. Black
in that way…our nonprofit status gives us a River Produce does not accept any grant funding
lot of flexibility…to take on risky pilots or do for this exact reason (S. Sparks, personal commu-
scientific research that we wouldn’t be able to nication, April 14, 2014). Mad River Food Hub in
cover with our trade margin” Waitsfield, VT is another example of a for-profit
– Laura Edwards Orr, Red Tomato enterprise whose founder did not want to rely on
grants, viewing the model as unsustainable. This
On the other hand, the governing structure of a point of view influenced Mad River’s targeted
non-profit may lead it to be naturally risk-averse. customer base as well; while they initially they
sold to institutional clients such as schools and

7
cafeterias, they found the price points to be pro- In their investigation of small-scale food hubs,
hibitively low (Jacobsen 2013). Horrell et al., found that for hubs that distributed
profits to shareholders, financial viability was the
According to the responses to the 2013 Nation- primary driver, with social/ethical considerations
al Food Hub Survey, for-profit hubs were more being a secondary motivation (Horrell et al). Bal-
financially profitable than non-profits, but were ancing the tensions between social and commer-
less profitable than cooperatives. The survey cial work can be difficult to manage, and there
analysts calculated the average business efficiency was a recognition that commercial success could
ratio for each respondent, which is the proportion lead to a drift towards replicating the conven-
of total expenses to total revenue. A number low- tional food system they had originally intended
er than 1 indicates profitability. The average ratio to provide an alternative to (Horrell et al). Share-
for for-profit food hubs was 1.06, but the range holder-owned hubs appeared to invest in strong
was wide (0.33 to 3.53). Food hubs that had the operational and IT systems to control variable
word “environment” in their mission statement costs and had staff with experience in the private
were less likely to rely on outside funding (73 sector (Horrell et al.).
percent were not at all dependent and 27 percent
were somewhat dependent) (Fischer et al., 2013). Cooperatives
Black River Produce integrates environmental
stewardship into its operations in an attempt A cooperative is owned and democratically con-
to reduce their carbon footprint. They have the trolled by its members; the members elect the
largest solar array in Vermont, use clean diesel board of directors. Cooperatives can be produc-
and biodiesel in warm months when they can, in- er-led, retailer-led, or have consumer members
stalled LED lighting motion sensors, and a refrig- (e.g. buying clubs). The cooperative structure
eration system that uses outside air for cooling (S. is a well-known, established community entity
Sparks). with strong roots in agriculture (Matson et al.,
2013). Membership fees provide working and
investment capital, and any surplus revenue is
distributed and returned to members. According
to the 2013 Food Hub Survey, cooperatives were
the most financially successful food hubs, with
a mean business efficiency ratio of 0.94 (Fisch-
er et al., 2013). No cooperatives had language
about food access in their mission statements, but
cooperatives had the highest amount of language
about consumer awareness and the environment
(Fischer et al., 2013).

The cooperative model aggregates the market

power of its members, who benefit from efficien-
cies gained and better prices as a result of central-
ized marketing and business development efforts.
A cooperative can serve as a business incubator
for its members, whether for new growers try-
ing to establish themselves in the market or for
existing growers looking to expand and diversify.
The cooperative can help growers improve their
practical knowledge, marketing skills, and busi-
ness relationships (Lerman et al., 2012).

8
The horizontal leadership structure of the coop-
erative model has its disadvantages. If the orga-
nization lacks clear delegation of responsibilities,
“this model can result in disorganization, leader-
ship imbalance, and fatigue” (University of Wis-
consin, 2010). Red Tomato originally considered
the cooperative model for its own operation, but
decided against it because the founder did not
want slow and risk-averse decision-making pro-
cesses to interfere with the organization’s agility
in responding to market demands (Matson et al.
2013).

Relationships
Information exchange and transparency
Relationships built around regular communica-
tion and transparency are key to the growth and
success of food hubs within a values-based supply
chain (VBSC). VBSCs are most effective when
producers, distributors, and retailers develop
long-term relationships that meet the needs of all
parties involved. By avoiding conventions typi- transparent process, resulting in efficiency, equity
cal of the mainstream food industry and instead and working relationships built on trust (Matson
openly sharing information among supply chain et al., 2013).
partners, food hubs form relationships built on
trust and loyalty that prove crucial during the
Strategic partnerships
scaling up process (Lerman, 2012).
Working relationships within VBSCs are crucial
A literature review of VBSCs found that these for growth in the local food sector. By devoting
relationships are regularly characterized by open resources to relationship development at multi-
communication and negotiation, reasonable ple levels within the supply chain, food hubs are
power structures along the supply chain, un- enabled to navigate the scaling up process with
derstanding of other partners’ business models, greater ease (Clark et al., 2011). Additionally, a
and transparency about each other’s strengths repertoire of diverse contacts with complementa-
and weaknesses (Lerman, 2012). These types of ry businesses and organizations within the com-
relationships develop through efficient and equi- munity can provide the food hub with needed re-
table information exchange. Part of a food hub’s sources and greater market access. For example,
role in the supply chain is to regularly gather and a relationship with Newport Restaurant Group
manage information from producers, consumers, helped Farm Fresh RI learn about restaurants’
and investors in order to facilitate transactions expectations and desires for produce ordering,
that avoid risk and benefit all partners. Some of allowing the food hub to increase their Market
this information includes communicating pro- Mobile sales to restaurants in the area (J. Rye).
tocols for quality assurance from distributors to
producers, relaying customers’ willingness to pay By engaging a wide range of community stake-
to producers, and sharing production costs with holders, food hubs can leverage a variety of re-
consumers. For many food hubs, price setting is a sources that will help the organization reach its

9
full potential (Barham et al., 2012). The USDA’s came from inside sources on average, including
Regional Food Hub Resources Guide encourages income from services provided, membership fees,
food hubs to reach out to all potential partic- bank loans, and private investors. Income from
ipants in the supply chain, including schools, services provided accounted for 86 percent of
institutions, distributors, retailers, foundations average revenue. Outside sources included feder-
with shared values, economic development agen- al state or local government funding, foundation
cies, planning organizations, and health depart- grants, in-kind support, and donations. About
ments at the city, country, and regional levels one-third of participating food hubs reported
(Barham et al., 2012). However, focusing first revenue from both inside and outside sources.
on the sectors that are most open and interested For these food hubs, an average of 77 percent of
in the food hub’s mission and engaging the food revenue was from inside sources (Fischer et al.,
hub’s work will prove most effective. 2013).

In addition to interest, flexibility in the potential Funding sources

partner’s operational structure to work with the
food hub is also key. For example, it was noted When expanding operations or piloting a new
that Ohio retailers had the desire to build rela- project, financial support in addition to the food
tionships with the farmers they were purchasing hub’s earned income is often needed to help fund
from, but the opportunity to do so varied with the growth. There are a variety of funding op-
retailer size. Mid-sized retailers and independent tions, such as federal grant and loan programs,
stores were found to have the most autonomy philanthropic foundations, and corporate dona-
and flexibility in purchasing decisions (Clark et tions. Financial assistance can come in the form
al., 2012). To better facilitate growth, food hubs of in-kind support as well. Donated equipment or
should focus on relationships with business shared processing facilities can help the food hub
partners and community stakeholders that have reduce costs while still expanding operations and
both interest in the food hub’s work and time and market offerings (Day-Farnsworth et al., 2009).
flexibility to develop a working relationship that
benefits all involved. Food hubs should also look for support from
partners that have a stake in the food hubs suc-
cess (Matson et al., 2013). For instance, Laura
Funding Edwards-Orr from Red Tomato, stated that
when Red Tomato wants to pilot a new project
Based on finding from the 2013 National Food that would not be covered by their trade margin,
Hub survey, 92 percent of food hubs’ revenue “we look for relationships with funders, mostly

10
 short-term revolving credit to maintain sufficient
cash flow for payments (Barham et al., 2012). In
addition, inadequate access to capital is often cor-
related with a food hub’s operational scale. This
means smaller food hubs have the greatest diffi-
culty accessing capital and are the most restricted
in terms of market growth (Matson et al., 2013).

Several unconventional funding opportunities are

emerging as well that could prove advantageous
for food hubs. Innovative loans from social en-
terprise organizations, Community Development
Financial Institutions, and a few USDA loan pro-
grams provide low-interest loans accompanied by
technical support for food hub operations. Social
enterprise investors may also be drawn to the so-
cial benefits provided by food hubs. These social
investors are looking for investment opportuni-
ties that provide a social or environmental ben-
efit, while also receiving financial returns. There
are also a few less traditional options available,
such as crowdfunding (Barham et al., 2012).

Funding considerations
Food hubs have a variety of funding opportunities
to assist them with market expansion. However,
based on business model, operational structure,
and mission, not all funding sources are viable
options for every food hub. For example, social
foundations, that are trying to answer the same enterprise investments increase food hubs’ access
questions we are and are interested in partnering to capital, but food hub management must be
with Red Tomato to understand where there’s able to guarantee financial returns to investors.
opportunity and where change can be made” This investment introduces a new challenge of
(L. Edwards-Orr). Some food hubs, such as Red meeting funder expectations. When selecting
Tomato, prefer financing growth through grants funding sources, food hubs should avoid design-
due to the flexibility and minimized risk that they ing programs that meet the needs of the funder
offer. but not necessarily the food hub, which could
jeopardize the food hub’s ability to fulfill its goals
Other food hubs prefer to scale up through debt and serve its constituents (Horrell et al.). All
financing. However, access to capital is often a funding types come with challenges. Therefore,
significant barrier for scaling up food hub oper- food hubs must carefully consider which funding
ations or infrastructure development (Matson sources best enable them to carry out their mis-
et al., 2013). Market conditions for food hubs sions.
are encouraging, yet access to capital was fre-
quently identified as a limiting factor to growth
in the 2013 National Food Hub Survey (Fischer
et al., 2013). The difficulty with accessing capital
was also linked to problems related to obtaining

11
Managing Growth identified the following areas to have “many” or
“some opportunities” for expansion: restaurants,

and Matching Supply caterers, or bakeries (87%), food cooperatives or

buying clubs (74%), corner stores/small grocery

and Demand (70%), online store (66%), colleges/universi-

ties (64%), hospitals (61%), distributors (60%)
(Fischer et al., 2013).
The current market conditions for food hubs
seems favorable, offering much potential for Despite conditions being right for food hubs to
growth. Local food was included in six of the expand operations, growth is challenging. Man-
top twenty food trends for 2014 in the National aging growth (77%) and balancing supply and de-
Restaurant Association’s Culinary Forecast. They mand (59%) were recognized as one of the three
included locally sourced meats and seafood, local- greatest challenges faced by food hubs in the 2013
ly grown produce, environmental sustainability, National Food Hub Survey (Fischer et al., 2013).
hyper-local sourcing, sustainable seafood, and Adding more producers and buyers, managing
farm/estate-branded items (Cantrell et al., 2014). new expenses related to growth, and maintaining
Eighty-three percent of consumers surveyed in adequate cash flows for payments can be tough
the 2011 National Grocers Association survey (Lerman, 2012). Additionally, food hubs often
indicated that the availability of local food was struggle with the chicken-or-the-egg conundrum
“very” or “somewhat important” to their choice of of whether to build up supply or demand first.
a food store (Cantrell et al., 2014). Growth may also require the food hub to increase
their technical expertise and management skills.
Food hub managers also recognize the promising
market opportunities. In the 2011 National Food
Challenges for matching supply
Hub Collaborative survey, almost all the food hub
operators who responded said that expansion and demand
opportunities exist for their food hub. Accessing Factors frequently cited as hindrances for food
new markets and increasing product offerings hubs matching supply to demand include quan-
were identified as the clearest mechanisms for tity, product availability, and the growing sea-
growth (Barham et al., 2012). Food hub operators son. Despite their interest in including more
12
local produce and products, restaurants, grocery
stores, schools, institutions, and corporations are
often unable to get local food products in quanti-
ties large enough to meet their food service needs
(Matson et al., 2013). Distributors and other
wholesale buyers also require a sufficiently large,
reliable supply of quality product before agreeing
to purchase more local food.

Product availability, such as diversity of products

offered and available delivery routes and times,
can also limit food hubs sales. A customer survey
for Regional Access food hub in upstate New York
showed that both household (33%) and business Supply or Demand? When scaling up,
(66%) customers were interested in increasing do you build supply or demand first?
their purchases if Regional Access expanded
their product offerings in some way. Household “Our rule of thumb is that the market drives ev-
customers desired additional product offerings, erything. So we don’t ever want to be in a position
smaller minimum orders, and more delivery where we’re telling a grower to plant something that
routes and times. Business customers wanted we don’t know with some certainty that we can sell.
So we’re constantly working to build demand and
greater diversity and more year-round products
then carefully ratchet up supply in response to that
(Schmit, 2013). demand. Five years spent on some seriously suc-
cessful business development means that we might
The seasonality of produce introduces addition- then spend Five years primarily working on supply
al challenges to matching supply to demand. In development. And I could see an argument for the
many regions, the demand for local food exceeds leap from $5 to $10 million being more focused on
the supply, but this is especially true in the win- supply, while the leap from $1 to $5 million would
be more focused on demand.”
ter season. Season extension practices, such as
– Laura Edwards Orr, Red Tomato
‘switch seasons’ farming’ or reducing production
in the summer and increasing production in the “They go hand in hand. You can’t really do one or the
winter, could help to increase product availabili- other first--they need to happen simultaneously, and
ty. However, a few food hubs have reported that you need to be thinking long term. Part of it is also
some growers are not interested in adjusting pro- building up trust. You can talk to someone about
duction practices (Barham et al., 2012). selling them something one year, but if you don’t sell
it, or if you don’t work with them to find an avenue
for it, the likelihood that they’ll want to work with
There is no lack of demand for local food. The
you again next year is less. But if you can help exceed
challenges with matching demand to supply often expectations, which I think we do pretty well around
involves inadequate information, undeveloped here in terms of helping people find customers. we
relationships, and logistical difficulties within the find that people are more open and willing to engage
supply chain. For example, restaurants, grocery in crop planning with you .”
stores, schools, institutions, and corporations – Jesse Rye, Farm Fresh Rhode Island
frequently face difficulty with obtaining enough
“Build demand-side first. Farmers who have nev-
information about local products and coordinat-
er farmed before need to study the market, talk to
ing the logistics of a working relationship with retailers, talk to restaurant owners, and find out
a local food supplier (Matson et al., 2013). Also, where the gaps are, as well as talking to Black River
consumers might not be fully aware of the social Produce.”
benefits and differentiated products offered by – Scott Sparks, Black River Produce
food hubs.

13
 tutions, corporations, restaurants, buying clubs,
and direct consumers, each with their own spec-
ifications for what they want and need. With
such a range of opportunities, it is recommended
that food hubs identify partners that are “well
matched in size and scale, and operate with simi-
lar goals and values” when expanding operations
(Matson et al., 2012).

The key for food hubs is to identify the optimal

scale of production needed for the food hub’s
planned market expansion. Food hubs selling
to larger buyers who expect certain quantities
must work with a greater number and/or larger
producers to supply the demand. Increasing the
number of producers can also help the food hub
to improve product offerings. Farm Fresh RI
works with 50 to 60 different small to mid-sized
farmers to meet the size and variety of orders for
Mobile Market (J. Rye). Growers Collaborative
in California works with farms ranging from less
than 10 acres to more than 400 acres. This multi-
sized producer models gives smaller farms access
Solutions to markets while still reaching quantities required
by wholesale buyers with product from larger
For a food hub to successfully navigate the scaling farms (Day-Farnsworth et al., 2009).
up process and better manage supply and de-
mand, it must understand the needs and expec- Food hubs must understand the importance of
tations of its suppliers and potential consumers well-matched scales of operations, but produc-
and determine how their interest can be aligned ers must also be aware and willing to response
to lead to growth. A food hub can better plan for to the changes needed for the food hub’s growth.
business expansion by conducting a marketplace Producers need to understand their own produc-
overview. A market overview will help the food tion capacity and be informed and in agreement
hub to learn about its market environment, iden- to how much they should supply (Matson et al.,
tify possible growth opportunities, and provide 2013). This usually involves active plant sched-
comparisons for assessing the food hub’s busi- uling and information exchange about different
ness potential (Moraghan et al., 2014). Gathering markets’ needs between the producers and food
information about customers’ price points and hub. A survey of Ohio retailers indicated that
order expectations, such as quantities and stan- mid-sized retailers and independent stores with
dards, producers’ costs, crop plans, and produc- more purchasing flexibility showed interest in
tion capacity, and the food hub’s services and working with producers to develop crop plans
value to the community will equip the food hub to and product lists (Clark et al., 2011). If all parties
develop a viable marketing and sales strategy for are willing and able, this is a great way to build
scaling up (Moraghan et al., 2014). trust and loyalty within the supply chain. Food
hubs and producers can also consider season-ex-
Matching scale of production tension options to increase supply and product
offerings for scaling up and meeting more de-
Food hubs serve a wide range of customers, mand.
including retailers, distributors, schools, insti-

14
Matching scale of infrastructure
Infrastructure for distribution systems is a crucial
element for the success of VBSCs. Like produc-
tion, the scale of infrastructure must appropri-
ately match the scale and size of the food hub’s
operations. A 2010 USDA Economic Research
Service report indicated that insufficient distri-
bution systems were a major barrier for getting
more local products into mainstream markets
(Matson et al., 2013). Building and expanding
aggregation centers create opportunities for food
hubs to expand supply and provide aggregation
points for smaller producers that enable them to
“jump” scales (Clark et al., 2011). Retailers and
distributors have also been reported to increase
inventory when common aggregations facilities
are available. Some may even be interested in
partnering to build the needed distribution infra-
structure (Clark et al., 2011).

Although infrastructure is essential for aggrega-

tion and distribution of local products, it is not
necessary that the food hub is the owner and Food hubs have the ability to offer this to con-
operator of these facilities. For example, Red sumers by providing information about where,
Tomato works with mid-sized producers that how, and by who food is produced (Matson et al.,
already have loading docks, refrigeration, and 2013). This information can also be transmitted
trucking facilities, so the food hub can focus its through labeling, branding, and certification,
efforts on marketing, trade, and education (L. which provides credibility and builds customer
Edwards-Orr). Growth opportunities should recognition with the food hub’s products. Addi-
also seek to maximize the use of existing infra- tionally, wholesalers and larger retailers often
structure. Farm Fresh RI grew their Veggie Box require formalized certification for the product
program by utilizing the same delivery trucks as they purchase. This certification gives the buyers
the Market Mobile program (J. Rye). Food hubs quality assurance, especially when not in close
should have or seek to have access to aggregation proximity to production, and reduces their risk of
and distribution infrastructure well matched to including more local food in their inventory. To
the operational scale for the planned expansion in access these markets, food hubs must be willing
order to reach full potential for meeting demand. to provide or help their producers to provide the
certifications required (Matson et al., 2013).
Building demand
On top of quality assurance, distributors, retail-
Focusing on product differentiation and quali- ers, and other potential buyers may simply need
ty assurance through consumer education and more information about what a food hub does
farmer-buyer relationships will help a food hub and how those operations can help their busi-
stimulate demand. Consumer education about ness. Food hubs are creating new business op-
the benefits of partnering with a food hub helps portunities that assist larger buyers access more
to build customer base and brand loyalty. In- local products to meet the growing demand from
creasingly, customers are looking for food prod- consumers for fresh, local food. In Food Hubs:
ucts that transmit social values and transparency. Solving Local, it is stated that “more retailers and
15
food service companies are finding that food hubs patience, dedication, and time. Black River Pro-
can help them deliver the real thing: Food from ducer in Vermont, which has been in operation
nearby with verifiable people, places, and practic- for more than 30 years, stated that they still face
es behind it” (Cantrell et al., 2014). Engaging food the challenge of “getting people to realize that if
hubs are innovative strategies for mainstream you want to support local farmers, you truly have
food businesses to get ahead of their competi- to support them financially” (S. Sparks).
tion. However, food hubs may need to initiate
some of those conversations and communicated
what they have to offer. Laura Edwards-Orr from Business Processes
Red Tomato, stated, “When we’re building a new
program for a new retail customer, it’s very much and Strategies
about who is that retailer, who are their shoppers,
what are they trying to do, and how can we help Pricing
them differentiate themselves in a crowded mar- Pricing models distinguish the food hub sector
ket” (L. Edwards-Orr). from traditional produce wholesalers and pro-
cessors. Food hubs tend to be more transparent
Price may also be a point of contention that about the pricing of each step of the supply chain
makes matching supply and demand difficult. within their control, providing fair prices to grow-
Some consumers are reluctant to pay price premi- ers instead of viewing them as price takers (Mor-
ums that are often associated with locally grown aghan et al., 2014). Local food sellers are able to
food. This reluctance can also dissuade distrib- sell to consumers who are willing to pay a pre-
utors and retailers from committing to larger mium if they know the origins of their local food
purchases from fear of not moving their product. (Matson et al., 2013). At the same time, pricing is
Again, consumer education and transparency are the chief concern for food hubs that aim to assure
the first steps for lifting some of this contention. fair prices for producers and affordability for
Some food hubs have reported an increased will- consumers, not to mention the fact that competi-
ingness to pay from consumers after devoting re- tion from the large companies in the convention-
sources to education and advocacy about the true al supply chain exert downward price pressure
costs of production (Barham et al., 2012). Also, (Lerman, 2012). World PEAS, Red Tomato, Farm
promoting the farm “story” resonates with con- Fresh RI, and Black River Produce, despite their
sumers, increasing their sense of social connec- diverse models, all share a goal of setting prices
tion and desire to support producers (Lerman et that are fair to growers.
al., 2012). However, increasing customer willing-
ness to pay is a difficult process that will require The World PEAS Food Hub provides a liv-
16
ing-wage market to graduates of the New Entry hospitals, and schools in Rhode Island and Massa-
Sustainable Farming Project’s Farm Business chusetts (farmfresh.org/hub). Farm Fresh RI does
Planning Course. The food hub aggregates pro- not directly purchase products from growers; they
duce from over 30 farmers and sells full-season provide an online marketplace that allows custom-
and fall-only CSA shares in the Greater Boston ers to connect with farmers in a prearranged agree-
Area. World PEAS retains a 21 percent commis- ment, and retain a percentage to cover distribution
sion on produce sales to cover its operational and administrative costs. During its pilot phase,
costs, which include vehicle and fuel expenses, Farm Fresh RI received grant funding to start up
packaging supplies, lease for its aggregation fa- Market Mobile. By 2013, trade income covered 97
cility, printing, and World PEAS staff (New Entry percent of Market Mobile’s operating costs, with
Sustainable Farming Project, 2012). For the first the additional 3 percent covered by fees retained for
time in 2010, World PEAS achieved operational back-hauling and logistics services. Initially, Farm
self-sufficiency after earning sufficient revenue to Fresh RI was retaining a 10 percent administrative
cover its operational expenses. Since scaling up fee, then raised it to 15 percent, but continued to
in 2012, when they leased a new packing facility operate at a loss. Realizing that they would have
and purchased a used delivery truck, expenses to increase their fee again to break even, manage-
again have exceeded earnings (New Entry, 2013). ment obtained buy-in from growers, producers, and
With plans to scale up its business development, customers to raise the fee to 18 percent. In addition
the management team at World PEAS decided to increasing the commission applied to sales, the
to invest in additional infrastructure to facilitate organization worked hard to increase the efficiency
a move to the next level of operations (K. Fitch, of its operation. (J. Rye).
personal communication, November 7, 2013).

The team at Red Tomato works with growers to

understand their costs and to determine a price
that reflects cost of production plus a reasonable
margin. Through this process they set an “ideal”
price for each crop, as well as a “dignity” price,
the lowest amount the grower would be satisfied
with in times of stiff competition (Alvarez et al.,
2010). Red Tomato retains about 10 to 11 per-
cent of the delivered cost of the package to the
customer (price paid to the farmer plus trucking
cost). This percentage reflects a season average;
the margin changes on a transaction-by-trans-
action basis depending on the cost of moving a
product, which is determined by how the product
is packed onto a pallet. For example, Red Toma-
to retains about 6 to 8 percent on sales of bulky
corn, which is piled 25 bags to a pallet, while they
can retain about 13 percent on blueberries, which
are more efficient to ship at 100 trays per pallet
(L. Edwards Orr).

Farm Fresh RI started its farm-to-business delivery

program, Market Mobile, in 2009. Today Mar-
ket Mobile distributes local produce, dairy, meat,
seafood, and other products from a network of 50
to 60 farms and producers to restaurants, grocers,
17
 “Part of it is the margin…but part of it is also
working to understand the efficiency you can
gain. However you can have your operation
be as lean as possible, that’s something you
should be doing before you increase your
margins…I think as a food hub you’re obligat-
ed to understand what you can do before you
try to push that burden onto your growers.”
–Jesse Rye, Co-Executive Director, Food Sys-
tem Enterprise at Farm Fresh RI

Black River Produce’s approach to pricing in-

volves assessing what the market will bear, look-
ing at what its competitors are charging, and
determining what their growers need to earn
for their businesses to be successful. Part of the
process involves educating farmers on the bene-
fits of selling to Black River Produce and the basis
for the prices they can offer. More than simply
increasing farmers’ access to local and regional
retail and wholesale markets, they assume full
responsibility for distribution, nurturing relation-
ships with buyers, and collecting and managing
finances. “A lot of farmers think that they can sell
to us at the same price as the farmers’ markets meet market demand and to ensure the econom-
but there’s no way that can happen,” explained ic viability of the food hub. Even after the price
Scott Sparks, Vice President of Sales. “We can’t reduction, farmers viewed their accounts with
buy at retail price and then sell to a retailer who Intervale as profitable and reliable, as they were
has to market [the product] again” (S. Sparks). able to sell wholesale quantities at prices varying
from 5 to 30 percent above normal wholesale
A food hub’s revenue model depends on which prices (Schmidt et al., 2011).
activities in the supply chain they focus on, as
shown in Table 1, excerpted from Wholesome Infrastructure Models
Wave’s Food Hub Business Assessment Toolkit
(Moraghan et al., 2014). Food hubs’ asset bases are diverse and depend on
the scale of operations and business structure. In
When Intervale Food Hub started its operation addition to the Food Hub Business Assessment
in 2008, they began selling at prices that were Toolkit released in March 2014, Wholesome
higher than wholesale market prices. In 2009, Wave is currently developing two guides related
farmers agreed to reduce their prices to better to physical assets. One will provide metrics for

Table 1
18
evaluating the efficient use of physical resources warehousing, and delivery to customers. In 2002,
and the other will elaborate considerations for it had become clear that the original model was
owning versus leasing physical resources (http:// no longer working. Red Tomato’s management
wholesomewave.org/hfci/). Some food hubs may team looked at the organization’s growth curve
be more willing to build up an asset base and own and found that they could gain some economic ef-
its equipment, others may prefer the flexibility ficiency by outsourcing the distribution logistics.
that leasing equipment and vehicles allows (Mor- Additionally, managing these aspects in-house
aghan et al., 2014). at the level to which they had grown was taking a
toll on all the personnel, who worked around the
The World PEAS Collaborative is an asset-based clock and rarely on more than four hours of sleep.
operation. Having outgrown the original on-farm One thing that facilitated this transition was the
packing site, World PEAS management began logistical capacity within the grower network.
leasing an indoor packing facility with a loading Since Red Tomato sources mainly from mid-size
dock in 2012, which drastically improved the wholesale-ready growers, many of them already
efficiency of its operations as well as the shelf had loading docks, refrigeration, and trucking
life and quality of the delivered products. They capacity. Therefore the capacity was already built
invested $13,000 to properly outfit the facility. into the network, but the responsibility and cost
The staff can now load full pallets in and out of could be transferred (L. Edwards Orr).
the cooler and into the packing area, reducing
the amount of time that produce is exposed (New “When we let go of those assets and were able
Entry, 2012). to focus on what the team was good at, the
gross sales went up dramatically.”
Michael Roznye founded Red Tomato in 2006, – Laura Edwards Orr, Red Tomato
and until 2002 ran it as an asset-based food hub
that directly managed all trucking, receiving, On the other end of the spectrum is Black River
Produce, an operation whose management team
values maintaining complete control over supply
chain logistics. Black River Produce owns ev-
erything from its facility to its trucks. For some
operations, the advantage of maintaining control
of the supply chain and its costs outweighs the
management cost. According to Scott Sparks,
Vice President of Sales, “we have full control to
make any changes [we] want. We don’t have a
middleman collecting a fee above and beyond the
actual cost, resulting in savings on our end” (S.
Sparks).

Farm Fresh RI has a warehouse where they re-

ceive deliveries each Monday and Wednesday for
deliveries to customers on Tuesdays and Thurs-
days. They do not own any trucks, but instead
have a long-term lease on one refrigerated 18-
foot truck. Based on the order size, they flex up
to three or four additional trucks on any given
week. The managers prefer to avoid the cost and
staff time involved in owning and maintaining
a vehicle fleet. Part of Farm Fresh RI’s success
stems from the strong relationship they have
19
established with their local truck vendor. Hav- access coordinator managing and overseeing the
ing established trust and a consistent stream of packing process (K. Petcowsky, personal commu-
business, combined with careful planning, they nication, September 26, 2013). Farm Fresh RI
are able to rent refrigerated trucks even during has benefited from having between eight and ten
times of year when supply is tight. However, AmeriCorps VISTA members, who serve as full-
Farm Fresh RI does not always act as the dis- time volunteers for a year at a host organization.
tributor. For example, they serve as a connector These volunteers were critical to the develop-
between farms and schools that want to purchase ment of new programs including Harvest Kitchen
local food through the Farm-to-School Program, (food processing by at-risk youth) and Healthy
but does not offer distribution services due to the Food, Healthy Families (a multilingual nutrition
complexity of accommodating school delivery education programming at Farm Fresh RI farm-
schedules, contractual requirements, and special ers markets) (J. Rye). Farm Fresh RI benefited
food safety requirements (J. Rye). from having dedicated volunteers whose terms of
service were long enough that the benefits out-
Staffing Plans weighed the costs of training.

Any food hub’s staffing plan is inherently depen- For food hubs that operate at any significant level
dent on its model and the scale at which it op- of scale, it is essential to hire, develop, and retain
erates. However, a few lessons emerge from the staff members who are skilled in recordkeeping
food hub literature and key informant interviews and accounting (Matson et al 2013). Although it
that may be generally applicable. It is common requires long-term financial commitment, it is
for non-profit food hubs to rely on support from more cost-effective to hire a professional man-
volunteers to supplement their existing human ager than to rely on volunteer members, interns,
resource capacity. World PEAS recruits volun- or inexperienced staff to oversee a food hub’s
teers to help pack its weekly CSA shares through- administration. Ideally, a management team will
out the growing season, with the CSA and food include individuals with skills and proven expe-

20
 of limited staff and budget. This often results in
employees extending themselves beyond contrac-
tual obligations out of a sense of personal duty. In
this way, Ballamingie and Walker noted that peo-
ple working in the community-based, non-profit
sector effectively subsidize the public interest
projects for which they work (Ballamingie &
Walker, 2013). The most successful food hubs
find a way to release senior management from
some day-to-day operational responsibilities to
focus on business development (Horrell et al.).

As for logistics staff, food hub managers should

do a cost-benefit analysis to determine whether it
makes sense to hire people through subcontrac-
rience in financial management, the food safety tors or as employees. When Farm Fresh RI was
regulatory environment, marketing and packag- starting out, they hired all of their drivers through
ing, inventory, management and quality control, subcontracts, giving drivers the discretion to set
and who can engage meaningfully with farmer/ up delivery routes and times. As the sales volume
business owners (Matson et al 2013). and scale of operations grew, the subcontractor
model was no longer ideal. Currently, there will
Staff must thoroughly understand the costs of be some weeks when Farm Fresh RI sends out
their operation in order to establish an appropri- four or five trucks with each truck making 20-30
ate margin and financial benchmarks. Further- stops. Given the level of coordination required to
more, food hubs often assume financial risk on execute the logistics while keeping producers and
behalf of producers and customers. For example, customers happy, the staff prefer the control they
Farm Fresh RI pays its growers on a biweekly ba- gain through hiring drivers directly as part-time
sis, even though some restaurants only pay every employees (J. Rye). By contrast, when Red Toma-
60 or 90 days, and some even less reliably. There- to was still an asset-based organization, all of the
fore it is essential to maintain a professional warehousing and transportation was handled by
accounting system that enables staff to track pay- direct hires. Now that the organization relies on
ables and receivables and perform regular cash subcontractors and growers for all trucking and
flow analysis (J. Rye). Black River Produce also storage logistics, none of these individuals are
commits to paying its growers regularly, while it employees.
extends lines of credit to restaurants and other
customers, assuming the risk and the responsi- For food hubs looking to scale up, it is important
bility of managing cash flow and hunting down to first assess its current staffing structure and
customers until they pay their bills (S. Sparks). determine if the organization faces a skills gap in
a critical area, such as financial management and
“Some of the biggest leaps and bounds we recordkeeping. Once the necessary staffing struc-
took as an organization came the year or two ture is in place and the food hub wants to scale
after we hired our first full-time accountant operations by a significant percentage, managers
and bookkeeper.” might consider a few options to compare using
– Jesse Rye, Farm Fresh RI cost-benefit analysis:

Due to funding constraints, many non-profit • Does the organization lack institutional
food hubs including Just Food in Ottawa, end up knowledge or skills in any critical areas that
managing a wide range of programs under several would aid its scale-up? Would it be worth
grants for different donors, within the constraints it to hire a short-term market develop-
21
 ment consultant who has experience in the incomes and increasing affordability of local
wholesale and retail sectors? produce for low-income consumers are direct-
ly at odds. Based on the findings from the 2013
• Are logistics personnel hired through sub- National Food Hub survey, offering multiple
contracts or as part-time employees? When additional services was correlated with more
was the last time the organization com- dependence on outside funding (Fischer, 2013).
pared the costs of each model to determine Investing resources into scaling up operations
what strategy is most consistent with the while simultaneously supporting the food hub’s
organization’s financial and societal goals? social mission is often difficult to manage, which
Will this change if revenues increase by 50 can lead to tension between social values and
percent, or even 100 percent? self-sustainability.
• To what extent do trade operations rely on
volunteer labor? Would it be possible to Because of this, some food hubs have willingly
bring on an additional staff member to gain chosen to forgo financial self-sufficiency in or-
more consistency? der to continually support and grow their social
mission. Many food hubs seek outside financial

Mission assistance to help them balance maintaining their

values and purpose while expanding operations.
Self-sustainability is not always the primary goal
Food hubs are unique operations in that they are
for food hubs due to their mission-driven nature.
not simply businesses for marketing, aggregat-
However, most food hubs still strive to operate
ing, and distributing food products. Food hubs
with efficiency and financial responsibility and
are often mission-driven operations backed by a
cover their costs with earned revenue where able.
specific set of social values and goals, including
As Jesse Rye from Farm Fresh RI put it, the key
both non-profit and for-profit models. Some of
is “being able to run an efficient operation while
these values include supporting farmers, promot-
making it true to your values” (J. Rye).
ing local food, and increasing food access. This
often leads many food hubs to offer additional
Growing a viable business while maintaining a
services, such as food pantry donations and edu-
social mission is no easy task, irrespective of the
cation about nutrition, cooking, and gardening.
food hub’s business model. Therefore, it is vital
In addition to providing access to markets and
for food hubs to consistently look through the
higher prices to producers, some food hubs often
lenses of their original purpose and values during
provide development services to farmers, includ-
every business and financial decision throughout
ing crop planning, season extension techniques,
the scaling up process to ensure that the food hub
business management training, and food safety
remains true to itself and its social mission.
training (Moraghan eta l. 2014). World PEAS’
CSA and food access coordinator provides a
significant level of crop planning and business de-
velopment support to its producer members prior
to the start of each season (K. Petcosky, personal
communication, November 7, 2013).

The mission-based nature of food hubs can often

create unique challenges around the business
decisions and self-sustainability of these opera-
tions. Serving multiple values at once presents
significant a challenge if the organization wishes
to achieve full financial self-sufficiency; espe-
cially since some goals like increasing producer

22
Other Resources
Business development University of Vermont Food Hub
There are many valuable tools that help to facil-
Management Professional Certificate
itate business development. Business develop- The Food Hub Management Professional Certif-
ment assists food hubs with conducting internal icate is a higher-education learning program for
and externals assessments and planning for food hub management. It is designed to equip
growth. Some processes food hubs may want to food hub operators with the essential knowledge
consider include: and skills needed for effective food hub manage-
ment by addressing many of the same challeng-
• Market overview or survey es discussed in this guide. The program will be
• Feasibility assessment launched in January 2015. (http://learn.uvm.
edu/partners/cals/programs/uvm-food-hub/)
• SWOT analysis
• Business and/or strategic plan
National Good Food Hub Network –
Wallace Center Winrock International
The National Good Food Hub Network (NGFH)
Wholesome Wave Business
is dedicated to the development the Good Food
Assessment Toolkit movement by supporting and fostering relation-
The Wholesome Wave Business Assessment Tool- ships in value-based supply chain by disseminat-
kit assists food hubs with evaluating their readi- ing information and providing technical assis-
ness for investment. The toolkit provides a frame- tance. The NGFH online hub provides a wealth of
work for assessing the strengths and weaknesses information about the latest research and upcom-
of the food hub’s business model and strategy, ing webinars and conferences by food hub and
impact potential, market overview, marketing VBSC leaders. (http://www.ngfn.org/)
and sales, operations, organization and manage-
ment, risk mitigation, technology and systems,
and finance. (http://wholesomewave.org/hfci/)
 

23
Sources
Alvarez, J., Shelman, M., Winig, L. (2010). Red tomato: keeping it local. HBS No. 9-510-023, Cambridge, MA.

Baarda, James R. Cooperatives and Income Tax Principles. University of Arkansas, LLM Course, 2007.

Ballamingie, P. & Walker, S.M.L. (2013) Field of dreams: just food’s proposal to create a community food and sus-
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