How to Make Food Hubs Financially Viable

The food industry consists of many rungs, meaning there are a wealth of business opportunities. Some are obvious, such as growing food crops, manufacturing finished products, marketing a food or beverage brand, or operating a retail outlet or restaurant.

But several other key steps in the supply chain are not as visible, at least not to the average consumer. Yet they play a vital role in the food ecosystem and can present solid opportunities for entrepreneurs, either to make money or to address social issues such as food insecurity or racial disparities. In some cases, they can facilitate both.

One such role is that of a regional food hub. Whether structured as a for-profit business or a nonprofit organization, a food hub manages the aggregation, distribution and marketing of source-identified food products primarily from local and regional producers. The goal is to strengthen small producers’ ability to satisfy wholesale, retail and institutional demand.

Food hubs have been getting more and more attention in recent years, as communities seek to further local food initiatives by building up scale. The success of farmers markets, community-supported agriculture and direct farm-to-consumer sales—especially in the wake of the COVID-19 pandemic—has proven that consumers want local foods. The problem is many small producers don’t have the resources, bandwidth or infrastructure to serve larger customers like retail chains, schools, foodservice or food banks, making it hard for them to stay afloat.

But with food hubs stepping in to aggregate goods from multiple producers, and oftentimes offering on-farm technical assistance, inventory storage and marketing, small producers can scale their enterprises. These efforts often benefit end consumers too, so a food hub’s mission may be twofold. For instance, many have a farm-to-school focus that supports not only local producers, but also nourishes children by delivering local products such as fruits and vegetables to school cafeterias.

A food hub’s mission could even be threefold. That’s the case for The Good Acre in Greater St. Paul, Minnesota. The nonprofit was built upon farm-to-school wholesale, but when the pandemic shuttered schools and increased food insecurity throughout the Twin Cities, it expanded into hunger relief. As discussed in the latest Edible-Alpha® podcast, The Good Acre launched a program to purchase produce from farmers of color and donate it to the families of three Hmong schools. The food hub also worked out contracts between the farmers and the major regional food bank. And with that, The Good Acre served three missions at once: uplifting diverse growers, aiding schools and feeding community members in need.

Food hubs are clearly noble ventures and represent meaningful work. But because they are a relatively newer concept and don’t always generate revenue, they can be tricky to get up and running and keep in operation. That’s why FFI has gotten so involved in this space, working to enhance their financial viability and their community impact.

Seeing the crucial role food hubs play, FFI has been developing training and resources for hubs since 2015. You can read about our work funded by the USDA Farmers Market and Local Food Promotion Program in our “Seeds of Success” story here. Currently, FFI is gathering interest in a free virtual food hub consultant training program starting this summer. This training is funded through our 2020 LFPP award. Read more about this award that allows FFI to help food hubs become more resilient here. Please check out our resources and reach out to us if you run a food hub, hope to start one or want to learn how your food or farm business can work with a regional food hub.

Like many food hubs, The Good Acre in suburban St. Paul, Minnesota, has its hands in many pots, all aimed at strengthening the local food ecosystem. Launched with a farm-to-school focus, the nonprofit works closely with small and BIPOC farmers and provides local food makers with resources to grow their businesses. Tune in to hear Farm Program Director David Van Eeckhout share more about this neat organization and its pandemic pivot to hunger relief.

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And now, our roundup of the best food and beverage finance news, events and resources from around the web…

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