As a small-scale farmer or food producer, there are many different selling channels to explore. These include:
Traditional Farm to Consumer: This involves having a direct selling relationship between you and your customers. This method consists of a lot of marketing, communication, and logistics planning to be sure you’re getting orders and getting your products to where they need to go. Selling methods include farm shops, at location, online, or at farmer’s markets. Benefits include retail pricing, no warehousing fees, and you remain in charge of your business operations.
Retailer: A retailer is any large-scale or artisanal grocery store, bakery, or butcher, that aggregates products from various different sources at wholesale prices, and sells at retail. It can take some effort to get placement in a retail location, but once in, it ensures shelf-space and a sales channel. A huge benefit of selling to retail is that you are guaranteed a broader audience. According to FMI, 83% of Americans do their shopping at a grocery store.
Restaurants and Institutions: Selling wholesale to a chef, hospital, church, school, etc. is a great way to make a profit. You are guaranteed a selling relationship and do not have any marketing costs on marketing throughout the contract period. However, it can be tricky to get a contract initially. To help you find restaurants to sell to, check out this article.
All of these sales channels are great ways to sell food, however, they are missing the focus on local food.
A food hub is all about local! As outlined in this blog post, a food hub is a business that actively aggregates, distributes, and markets source-identified food products from primarily local and regional producers. In other words, a food hub is a centralized platform where consumers can purchase local food direct from the producer through this business.
According to the USDA Food Hub Resource Guide, the hub must:
- Aggregate, distribute, and market primarily locally-produced foods from multiple suppliers and sell to numerous outlets.
- Provide technical assistance to producers when needed to reach buyer requirements.
- Consider the suppliers as valued business partners (they cannot be interchangeable) and commit to buying from mid to small-sized producers.
- Use product differentiation strategies to help suppliers get a reasonable price. These include marketing, branding, and food transparency.
- Have a positive social, environmental, and economic impact on the community by promoting suppliers that carry out production practices or environmental services.
Due to the specific rules and regulations of running a food hub, they are a great sales channel for small-scale farmers and food producers. Some of the great benefits include:
Work with people who know the business
Unlike selling to retailers or chefs, a lot of food hubs are run by farmers! This means they understand you and the industry best. Working with like-minded people provides an excellent opportunity for partnerships, empowering business relationships, and sales and production resources!
Receive a fair price
Due to the nature of a food hub, the mission is to support the local food economy, and increase accessibility to the market. The incentive to make large profits from their products is less than most wholesale partnerships, such as restaurants or large-scale retailers. As an example, Argus Farm Stop, a food hub and local food retailer, believe farmers should receive a fair price for their goods and give them 75% of the selling price to their farmers, compared to the average Michigan farmer who only receives 20 cents for every dollar sold. Luckily, Argus Farm Stop is not the only one. Many food hubs run with the same philosophy!
Get a distribution network
Another great benefit to selling with a food hub is their distribution network you get along with it. Distribution can be a huge problem for a lot of farmers and food producers. It’s expensive to operate your own vehicle or to use a third-party shipping company. A food hub has its own distribution network and can aggregate products and orders from many different customers. This will reduce the costs and alleviate stress off of you from having to do it yourself.
Marketing your product takes time, strategy, and money. We often just don’t have the resources to do it ourselves. A food hub is an aggregated platform that does it all for you. Due to their broad audience, food hubs are ready to take care of the marketing for you. They often reach a greater customer base than you would be able to yourself.
Can support your brand
In addition to the added marketing and sales force, working with a food hub can look great on your business’ resume. When aligning yourself with successful food hubs, the association reflects positively on your business, as it shows that your products are “good enough” to be sold by them. It is an interesting philosophy, but the association is great marketing and can help tremendously with brand awareness.
Selling with a food hub can be an excellent boost for your sales and offer you a platform that includes distribution, marketing, and brand development.