Local Food Supply Management
This page looks at details of securing local food supply through contracts and other means. See the wiki on "Supporting Local Producers" for articles and discussion on what food co-ops are doing to support local producers through purchases, loan funds, and the like.
One approach to building local food economies that is receiving increased attention is value-added and distribution enterprise that go beyond direct marketing, a diverse range of activities often centered around "food hubs." A good place to start on this topic is a 2011 USDA publication titled "Moving Food Along the Value Chain: Innovations in Regional Food Distribution." This covers La Montanita's Co-op Distribution Center and the Wedge's Co-op Partners Warehouse, along with half a dozen non- profit ventures. It is available as a pdf: http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=stelprdc5097504.
For this and related publications from USDA, see their "food hubs" section: http://www.ams.usda.gov/foodhubs. See also a brief review of two USDA publications on food hubs in the July-August 2011 issue of Cooperative Grocer, "Food Hubs Build Local Food Infrastructure," linked below under Related Content.
Given the growing interest in selling local produce, food co-ops are considering grower contracts and other means of ensuring access to local supply. Samples of agreements covering such topics as growing, ordering, and receiving, quality, and credit have been contributed to the CGIN website and will be added here. For one example, see "Guidelines and procedures for working with local growers," from Oryana Co-op, linked below under Related Content.
As an illustration of the considerations entering into mutually satisfactory relations with local growers, here are some comments (11/21/2000) from Hanover Consumer Co-op’s produce merchandiser, Tony White:
“First let me say that we do not have anything in writing, at least in the form of a signed contract. We do however have an annual growers meeting where we decide who will be growing what for us and discuss any changes for new season. I will include two attachments to this letter that are the results of our annual meetings.
Pricing: A price is agreed upon for each growing season, we consider the following factors in determining the wholesale price paid.
- Retail price of competitors in the area for similar product.
- Retail price of product at local Farmers Markets and Farm Stands. (I try to keep our price at or a little above the growers own retail for product at their stand.)
- Quality of product. Is product at an exceptional level of quality compared to commercial suppliers? An example of this would be my local supplier of lettuce. Quality is exceptional so I have decided to give the grower a higher price for upcoming season.
- Cost of growing and harvesting product. I want to make sure that our growers can make money on the crop grown for us. So I take into account things such as cost of boxes, cost of pickers etc. This past season I had to increase the cost paid for local blueberries and strawberries, labor shortages demanded that they pay more money for pickers, so we determined what price needed to be paid to assure a profit for grower.
- Once a price is set for season the price will not change unless the grower has an excess of crop and would like to a special run. At this point they will lower cost and I will lower margin. Other than that the cost of goods will stay the same. It will not be influenced by any commercial market price.
- We agree to limit our gross profit margin to 36%.
- Two years ago we made a change in how our crops where grown for us. It used to be that we would have a primary and secondary farmer for each crop. The problem with this was that the secondary grower would grow a particular crop with hopes that the primary would fall short. If the primary grower did not fall short the secondary would complain to my managers that they were sitting on product. The manager would feel bad and buy some to satisfy them and then the primary grower would complain. A vicious circle. I felt that this was not a good plan and made a change. So we made a change, we now have only one dedicated grower for each crop. I gave the grower estimates of how many cases we would go through on a weekly basis. And I told them that I expected them to meet these estimates on a consistent basis. We agreed that if the crop was consistently available during the growing season that a change may be made as to who will grow for next season. This change has been great for the Coop and great for the farmers. Every farmer has some crops that they feel they can grow and sell to us and make money on. You do need to be careful dividing up the crops the first year to make sure that all growers have some high volume items.
- We sell both conventional and organic produce. I have decided on some crops that we will sell only organic during the growing season for certain crops. Example of this would be summer squash, zucchini and green beans. To assure one of my organic growers a certain volume level only organic is carried on these items.
NOTE: This new policy has been very successful for all parties, the Co-op, growers and customers.
Quality: We demand the same quality level from our local growers that we have with any of our suppliers. If the quality is not there, than we do not accept it. At times this can be a tough thing for a local grower to accept, but if product is not high in quality both in appearance and taste then it needs to be refused.
Marketing Local Growers: This is an area that we have put a lot of resources into the last few years. Educating your customer as to who your growers are is so important. It is a real marketing advantage having local product in your stores; don’t miss out on the opportunity to promote it. Use photos, signage, and advertising to highlight your local growers.”