Importance of Intermediaries in Local/Regional Marketing Channels

Transcription

1 Importance of Intermediaries in Local/Regional Marketing Channels Miguel I. Gómez Dyson School of Applied Economics and Management Cornell University London Produce Show, Educational Session June 4, 2015

2 Agenda Local food systems growth prospects depend on intermediaries Farm-to-Hospital (FTH) programs opportunities for produce hinge on intermediaries A regional perspective - Developing an eastern broccoli industry in the US: role of intermediaries

3 Local food systems growth prospects depend on intermediaries

4 Local produce in demand, globally

5 Direct Markets in the U.S. In 2012, 163,675 farms (7.8% of U.S. farms) marketed foods locally (direct and intermediated) Estimated to be approximately $12 billion in 2012 About half of local foods are sold through retail and foodservice outlets

6 Direct Markets 6

7 Lessons from Case Studies Compare 3 types: Mainstream Local-direct Localintermediated

8 Products in local food supply chains travel fewer miles from producer to consumer than in mainstream chains, but fuel use per unit of product can be greater 2.5 Food Miles and Fuel Use for Mainstream, Direct, and Intermediated Supply Chains 2.0 Fuel Use (gal/cwt) ,000 1,500 2,000 2,500 3,000 Food Miles Mainstream Direct Intermediated

9 Producers in local food supply chains tend to receive higher revenues pe unit and a larger share of retail price. But volumes transacted in local chains are too small

10 Can Local Foods Go Mainstream? Supermarket distribution system favors large suppliers and facilitates long distance movement of products Can it meet growing demand for local food products? The attribute local can be difficult to maintain when a product moves to the consumer through intermediaries

11 Can Local Foods Go Mainstream? Branding is one solution - Cedar Summit Farm but fresh fruits and vegetables are often not branded Delivering to Distribution Centers or directly to points of sales? Specialty distributors - Co-op Partners Warehouse

12 Wegman s Local Grown Produce Program Since 1981

13 Prospects for re-localizing mainstream supermarket offerings? Depends on dynamics of supply and demand Aggregation to achieve volumes, consistent quality at competitive prices Access to processing and packing services at a competitive cost is critical

14 Efficient use of transportation is a challenge

15 Farm-to-Hospital (FTH) programs opportunities for produce depend on intermediaries

16 The Healthy Food in HealthCare Pledge Healthcare facilities commit to: Increase our offering of fruit and vegetables Implement sustainable food procurement program Work with local farmers local foods Encourage our vendors to implement sustainable programs.

17 OpportuniKes for Produce? FTH pilot programs across the U.S. Healthy Food Pledge changing behavior of foodservice units in hospitals OpportuniKes for produce? And for local produce? Detailed study focusing on over 100 hospitals in the Northeast

18 Findings: Untapped potenkal for produce, with crikcal parkcipakon of intermediaries Only 36% of the hospitals signed the Healthy Food in Health Care pledge 58% of hospitals have adopted a FTH program 63% have self- operated foodservice All hospitals rely on intermediaries to run successful FTH programs

19 Fruit and Vegetables in Hospitals Signed the Pledge? % of Budget Spent on Fruits % of Budget Spent on Vegetables YES NO 12 14

20 Fruit and Vegetables in Hospitals Have FTH program? % of Fruit that is local % Vegetables that are local YES NO 12 12

21 Top Challenges and Benefits of FTH Supply Reliability Cost of produce Convincing hospitals administrators Seasonality of foods programs

22 New Ways To Think About Local: The Eastern Broccoli Project and other vegetables

23 Opportunities OpportuniKes

24 Opportunities OpportuniKes Long- term water scarcity in major produckon regions Reduced transportakon cost is a`rackve Reduced carbon footprint is in demand Crop diversificakon is useful to growers Geographic supply diversificakon Locally grown produce is in demand

25 Eastern standard variety

26 Cornell Breeding Line

27 Realizing opportunity

28 Realizing opportunity

29 Realizing opportunity

30 Realizing opportunity

31 A`enKon in NYC Victors & Spoils for New York Times

32 A`enKon in NYC A`enKon in NYC

33 Broccoli Tasting Experiments

34 Experiment Procedure ParKcipants examined carefully three different types of broccoli Existing Variety (CA) New Lines

35 Willingness to Pay ($/lb.) $ $1 $0 No informakon New York / California East Coast / California Broccoli A Broccoli B Broccoli C NEW YORK CALIFORNIA NEW YORK

36 Retailer/Wholesaler Color, bead size, etc Survey

37 Retailer/Wholesaler Survey 80% purchase local broccoli, in season Very few pay a price premium for the local product Most retailers charge higher retail prices for the local product Unwilling to trade off attributes of the mainstream product for the local attribute (except color)

38 Hurdles the growth of an east coast broccoli industry: - Consistent quality and volumes, regardless of seasonality - ConsolidaKon of grower networks - Commitment of large packer- shippers and distributors

39 Concluding Comments Demand for local F&V is there, but it is hard to capitalize on this opportunity Much of the success of expanding localization hinges on efficient intermediation Specialized/niche channels (e.g. hospitals) offers untapped growth opportunities to the industry

40 THANK YOU! Questions? Comments? Miguel I. Gómez