Food Hub Feasibility Study:

Transcription

1 Food Hub Feasibility Study: Food Southeastern Hub Oklahoma Feasibility Southeastern A REPORT FOR THE CHOCTAW A REPORT FOR THE CHOCTAW NATION OF OKLAHOMA Produced by SCALE, Inc. and Economic Development Associates, LLC March 2018

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3 Food Hub Feasibility Study: Southeastern Oklahoma A REPORT FOR THE CHOCTAW NATION OF OKLAHOMA Produced by SCALE, Inc and Economic Development Associates, LLC March 2018

4 2 Acknowledgements FUNDER USDA - Agricultural Marketing Service, Farmers Market and Local Food Promotion Program LOCAL SUPPORT ORGANIZATIONS Choctaw Nation Casino Food & Beverage Department Choctaw Nation WIC Program City of McAlester Eastern Oklahoma State University - Meat Science Department Durant Farmers Market Idabel Farmers Market Kerr Center for Sustainable Agriculture Noble Research Institute Oklahoma State University Cooperative Extension Service Pittsburg County Farmers Market Poteau Farmers Market Valliant Farmers Market FARMERS, BUYERS, & SURVEY PARTICIPANTS IN SOUTHEAST OKLAHOMA We would like to thank all community members who provided their time and insights during this process. This study is a critical step in the process of creating a more robust, local food system and local food economy. SCALE, INC. Anthony Flaccavento Meg Williams ECONOMIC DEVELOPMENT ASSOCIATES, LLC John Hendrix CONTACT INFORMATION Dale Jackson, Executive Director of Natural Resources, Choctaw Nation of Oklahoma rjackson@choctawnation.com (580)

5 3 Table of Contents 4 Executive Summary Context - Current State of the Local Food System in the CNO Region 4 Key Findings 4 Summary of Recommendations 6 9 Project Background Purpose 9 Scope of Work 9 Project Study Team 10 Research Methodology 10 Tribal Context 12 Tribal Food System Food Industry Supply Chain The Appeal of Food Hubs 16 The Nationwide Food Hub Landscape 16 The Established Food Supply Chain 17 Food Hub Competition Market Analysis: Part 1 Ag Production within CNO Territory Market Analysis: Part 2 Customer Base within CNO Territory Market Analysis: Part 3 CNO Competitive Advantages 31 CNO Market Conditions Food Hub Business Models Direct-to-Consumer 34 Wholesale 36 Projected Revenues & Costs, Years Business Model: Comparison of Key Requirements for Financially Viable Operations 42 CNO Strengths, Weaknesses, Opportunities, & Threats 43 Business Model Recommendations Organizational / Ownership Structures 48 Risk Mitigation Strategies 49 Appendices

6 Executive Summary Executive Summary After a year of data gathering, interviews and surveys, investigation and analysis, SCALE, Inc of Abingdon, Virginia and Economic Development Associates, LLC ( Consultants ) of Mississippi, submit this final report to the Choctaw Nation of Oklahoma ( CNO ). This Executive Summary highlights the key findings and recommendations, both of which are spelled out in much greater detail in the body of the report. Context Current State of the Local Food System in the CNO Region There is significant momentum to expand and strengthen the food system in the CNO region, driven to a large extent by staff from the Choctaw Nation of Oklahoma, supported by grants from the USDA and other sources. This has borne some fruit already, as farmers, farmers market leaders, health, nutrition and food assistance staff, and potential customers have become more conscious of the local food system and begun to consider how they might contribute to its improvement through their own actions as producers, consumers, and community leaders. This increased awareness and interest notwithstanding, it is the opinion of the Consultants that overall, the local food system in the CNO region is relatively undeveloped at this point. This means that recommendations to grow and strengthen the local food system must begin with a focus on the essential building blocks of a local food system, rather than moving to more sophisticated and challenging initiatives in the short run. In creating these building blocks, this foundation for a more robust local food system, the CNO region has a unique asset that most fledgling food system efforts do not: The Choctaw Nation of Oklahoma s institutional commitment to a stronger local food system, and its considerable experience in launching and managing a range of businesses. Key Findings 1. The foundation of every successful food hub is strong and reliable production from local farmers. Over the course of this investigation, our assessment of the current base of farmers has evolved, and we now believe that there are enough farmers with sufficient potential production capacity to eventually support a food hub of some size. a. The primary challenge here is with location there is no single concentration of farmers around which a strong initial production base can be built. That said, the area east of Durant, including along the Red River, seems to offer good potential both in terms of the quality of soils and the presence of a handful of larger capacity farmers.

7 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA 5 b. Other, smaller farmers who are either now focused on farmers market sales, or who are beginning farmers, could be brought into a food hub over time, assuming that pricing and logistical issues can be worked out. c. The strategy adopted by CNO will need to account for the needs of both smaller farmers accustomed to farmers markets and other direct-to-consumer (DTC) markets, as well as larger farmers oriented towards wholesale production. 2. There is a need to diversify production generally, including both the length of season (more season extension for spring and fall/winter) and the mix of items grown. While this may be challenging given the climate of southeastern Oklahoma, supplying a CSA in particular will require a wide, interesting mix of products to build and maintain a customer base. 3. There is a high level of interest in supporting this initiative from OSU Cooperative Extension, the Noble Research Institute, the Kerr Center for Sustainable Agriculture and others who appear ready to assist CNO in offering training and technical assistance to build farmer capacity. 4. Markets are and likely will continue to present the biggest challenges in developing a food hub in the CNO region. There are a number of reasons for this: a. Rural food hubs always have greater challenges when it comes to markets than those hubs located closer to towns and cities. This challenge, this lack of even midsized markets within a reasonable distance is particularly acute for the CNO territory. b. Surveys and focus groups indicate a broad base of interest in workplace-based CSAs within one or more of the CNO employee sites. While there is real potential here, it is also somewhat limited by concerns about the cost of a share, and the common desire for a short season weeks at the outset. It should also be noted that door-to-door food delivery services are becoming increasingly common though less so in the CNO region and may limit the growth of a CSA over time. c. Other DTC markets include the farmers markets in the region, discussed in more detail below, and the CNO food assistance programs. The latter is already serving as a small market for some local producers and could grow modestly, with more planning and coordination. d. FreshPoint, the country s largest distributor of fresh produce, is looking for more local sources and appears interested in working with CNO to develop and build a supply to meet their demand. This could provide a very large market base, potentially of several million dollars annually. However, they are offering little if any price premium, a fact that will limit the number of farmers able or willing to grow for them. e. There are a few additional food distributors, including Go Fresh, which may offer significant markets to a CNO food hub. f. We found virtually no interest in purchasing from a CNO food hub from the midsized grocers in the region, including Pruett s and Marvin s to whom we reached out a number of times.

8 6 Executive Summary g. It s unclear what the demand will be from the CNO Casino, and the grocery store and café within the new CNO headquarters complex, though it appears to be relatively small. 5. The market challenge, overall then is that there does not appear to be much of an intermediary market between the CSA and much larger, wholesale markets such as FreshPoint. 6. A review of other food hubs indicates that a relatively small 1000 square feet or less and simple space is needed for a food hub to get started on a pilot basis. 7. Differing food hub models all have significant pros and cons. This study includes information on three types: A direct-to-consumer (DTC) focused hub; a traditional Aggregation and Distribution approach, including both wholesale and DTC markets; and a Brokerage model, in which the hub facilitates connections between buyers and farmers, but does not handle the product itself. Of these three, the Brokerage model presents the lowest capitalization, risk and operational management challenges, by far. However, it is also the most limited in its likely impact on the local food system in terms of improving the availability of healthy food to local communities, or creating opportunities for new and limited resource farmers. Summary of Recommendations The following recommendations assume that the Choctaw Nation of Oklahoma plans to move forward in strengthening the food system and is looking for the most practical ways to do so. RECOMMENDATION 1: Assist the Durant, McAlester and Valliant farmers markets, as outlined in accompanying documents, to expand their base of producers and customers, and to make other needed improvements, in order to become a more substantial part of their local food system and make healthy food more readily available in their communities. Each of these three markets is receiving specific, customized recommendations. RECOMMENDATION 2: Identify a fourth farmers market in a different part of the CNO region and provide concerted assistance over the next two to three years to grow and build that market, following a similar but adapted set of recommendations provided to Durant and McAlester. No market emerged to the Consultants as the most likely candidate for this effort, but Macy s work may have surfaced the one best suited to this effort. The Poteau Farmers Market in Leflore County may be a good candidate. It has a full-time manager and is located in the northeastern region of the CNO Territory. RECOMMENDATION 3: For 2018, in addition to the work to build up the four farmers markets, we recommend: 1. Work with Extension, the Noble Research Institute and other agriculture support agencies to identify and reach out to 6 10 farmers who appear to be ready to form a production base for a food hub. These farmers should be in relatively close proximity to one another, or be in no more than two clusters. They should have significant experience, growing on a scale of at least 5 10 acres; and they should be able and willing to take a small amount of risk.

9 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA 7 2. In the fall of 2018, begin recruitment of CSA customers, focused on employees at the CNO headquarters complex in Durant, along with the employees in Atoka. This should include a fairly detailed description of the program, the different options you re offering, the range of items to be included, cost and payment and logistical details. The goal should be shares in the first year of operation. 3. Determine unmet needs in CNO s food assistance programs and identify specific items that could be grown and provided through the food hub. 4. Also in the fall of 2018, meet with the Food and Beverage Manager at the CNO Casino in Durant to identify 3 5 produce items to which they are willing to commit to purchase (assuming quality standards are met) on a regular basis in RECOMMENDATION 4: Launch a small, pilot food hub in 2019, based on the market demands developed through the CSA recruitment, negotiations with the Casino, and the unmet needs of CNO food assistance coupon programs. We are projecting year one sales of approximately $150,000 in this scenario $125,000 in CSA sales (250 shares for 20 weeks likely split into two seasons at $25 per share/week) $15,000 in sales to CNO food assistance programs $10,000 in sales to the Casino ($500/week for 20 weeks) RECOMMENDATION 5: Build out these three markets, and the needed production base, during with a goal of $300,000 by year three. Evaluate the trajectory of operational costs and revenues, as well as the potential for increased production from farmers, to determine if further expansion of the food hub into wholesale markets is feasible. RECOMMENDATION 6: During the three-year pilot phase, utilize a leased facility for aggregating product, possibly augmented by movable cold storage facilities. A minimum of 1000 square feet of open space, plus 400 square feet of walk in cooler space should be secured for this purpose. RECOMMENDATION 7: An entrepreneurial staff person should be designated as the food hub Operations Manager during the start-up phase, someone capable of recruiting farmers, building the market (both of these being primarily off-season duties), and overseeing the aggregation and distribution process. A core of volunteers including potentially, CSA customers interested in a discounted share cost would be needed to pack boxes each week. RECOMMENDATION 8: Our research into comparable rural food hubs, as well as a review of national data on hubs, indicates a probable break-even level of $2.5-$3 million in annual sales. Substantial wholesale sales, primarily to FreshPoint or other established food distributors, would be essential to meeting this target. Because it would be difficult to grow and maintain a CSA in excess of 500 shares (equivalent to approximately $300,000 in annual sales) or to boost sales to the casino beyond $100,000, three fourths or more of the total sales would need to be wholesale.

10 8 Executive Summary We think it is unlikely that the CNO food hub will reach that level of sales in less than ten years. Therefore, we recommend that CNO leadership undertake this effort primarily as a community development enterprise, rather than a pure business model, the goals of which include increased opportunity, income and profitability for farmers in the region, increased access to healthy foods and better eating for CNO tribal members and other residents, and improved stewardship of land resources in the region. It should also be a goal to eventually reach self-sufficiency for the food hub enterprise, but this is likely to take ten years or more, and may never be achieved completely. For 2018, we recommend that CNO focus on strengthening 3-4 Farmers Markets to expand their base of producers and customers, and to make other needed improvements, in order to become a more substantial part of their local food system and make healthy food more readily available in their communities. This should better-position the CNO Territory to launch a Pilot Food Hub in the near future.

11 Project Background Purpose The Choctaw Nation of Oklahoma ( CNO ) is conducting a feasibility study to determine the economic viability of a food hub in southeastern Oklahoma. Funding for this feasibility study was provided by an 18 month grants from the United States Department of Agriculture - Agricultural Marketing Service, Farmers Market and Local Food Promotion Program ( FMLFPP ). This study examines the viability of whether CNO can develop a food hub that can achieve the following objectives: Strengthen local Ag Producers by facilitating access to profitable sales outlets Improve access to healthy food in the CNO region Increase collaboration among food system stakeholders Become financially self-sustaining Project Background Scope of Work Analysis of potential food aggregation, packing and storage facilities that would enable farmers to access wholesale buyers in the region and possibly beyond and allow partner organizations, including Choctaw Nation Division of Commerce to store, pack, and deliver food orders to tribal businesses. Examine operational issues including possible existing infrastructure for non-profit food organizations; balanced with spaces leased to for-profit organizations and professional tenants at market values. Examine the local economic and political environment including identification of stakeholders. Market analysis including the size and scale of the potential hub and identification of potential regional customers. Each of these components is expected to benefit from close proximity, shared resources and opportunities for collaboration. Each component could involve the provision of additional services for farmers, clients and partners, including but not limited to insurance, traceability, certification, business planning, land management and marketing. This feasibility study will guide future decisions regarding the Choctaw Nation Food Hub, including if and how to proceed with the business planning process.

12 10 Project Background Project Study Team Based on 32 years of work in the field, SCALE, Inc. s founder and President, Anthony Flaccavento provides a unique combination of hands-on experience as a commercial organic farmer, a small business owner, and a non-profit director with relevant education including a BS in Agriculture and Environmental Science and a Masters degree in Economic and Social Development. Prior to starting SCALE, Inc, Anthony founded Appalachian Sustainable Development (ASD), which, among other enterprises, launched Appalachian Harvest in 1999, one of the nation s first community-based food hubs, linking farmers with buyers in southwestern Virginia and northeastern Tennessee. His Booklet, Healthy Food Systems: A Toolkit for Building Value Chains has been utilized by leaders of established and emerging food hubs around the country. Megan Jamison, Director of Research, helps design and carry out research projects for SCALE, ranging from food hub feasibility studies, an examination of college and university food procurement practices in central Appalachia, to the relative affordability of farmers markets vis-à-vis supermarkets in 19 communities in the southeastern United States. SCALE staff are joined on this project by Mr. John Hendrix, of Economic Development Associates, LLC. John has been working on economic and food systems development in Indian Country for almost twenty five years for the Mississippi Band of Choctaw Indians. John holds a Masters degree in Business Administration. Like Anthony and his staff at SCALE, John brings a great deal of hands-on experience working with farmers, buyers and other food system stakeholders. John serves as General Manager of Choctaw Fresh Produce a tribally-owned USDA certified organic produce farm, and has secured $2 million in grant funding to support its start-up operations. He has also helped several other tribes throughout the U.S. develop strategic plans for their food sovereignty initiatives. His specific extensive work in Indian Country provided invaluable experience and insights, which enabled our team to hit the ground running. Research Methodology To gain a full understanding of the food system in southeastern Oklahoma, the Consultants used a variety of methods in order to gather both quantitative and qualitative data, conduct research and immerse themselves into the local food community. These methods included: Surveys: one for Ag Producers and another for Buyers Interviews: both in-person and over the phone Focus Groups: with Ag Producers and CSA customers On-site visits: conducted in April 2017, July 2017, and November 2017 Other industry research and communications This research gathered input from the following regional stakeholders: Focus Groups Producers:

13 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA 11 McCurtain County Pittsburg County Leflore County Employee CSA Durant Hugo Surveys Buyer Survey Ag Producer Survey Food Outlet Site Visits & Interviews Clayton Store Casino F&B Pruett s Grocery Fresh Point Marvin s Grocery Lovera s Market Braum s Farmers Market Interviews Atoka Durant Hugo Coalgate Poteau Talihina Valliant Idabel McAlester Krebs One-on-one meetings Key CNO Stakeholders Go Fresh A total of 31 ag producers completed a detailed survey and expressed interest in supplying a food hub

14 12 Project Background Fresh Point EOSU Meat Processing Marvin s Grocery Store Distribution Center Pruett s Market CNO Casino F&B Manager CNO Food Subsidy Programs Braum s Pro*Act Network Tribal Context BRIEF HISTORY The Choctaw Nation of Oklahoma ( CNO ), commonly referred to as the Choctaw Nation, is a federally recognized American Indian tribe with a tribal jurisdictional area comprising twelve tribal districts. The Choctaw Nation is one of three Choctaw tribes; the others are the Jena Band of Choctaw Indians (located in Louisiana) and Mississippi Band of Choctaw Indians (located in Mississippi). Those are descendants of Choctaw who resisted the forced relocation to Indian Territory in Oklahoma. Those Choctaw who removed to the Indian Territory, a process that went on into the early 20th century, are federally recognized as the Choctaw Nation of Oklahoma. The removals became known as the Trail of Tears. The Choctaw Nation maintains a special relationship with both the United States and Oklahoma governments. The Choctaw Nation is a non-reservation-based tribe, meaning it is integrated and tribal members live in communities with citizens of all races. The Choctaw Nation is the third largest tribal population in the country with 176,682 tribal members worldwide and the tribal service area is home to 52,351 American Indians. (Source: CNO USDA SDVFP Grant Application 2017) Choctaw Nation businesses generate hundreds of millions of dollars annually and more than 6,000 jobs for tribal and non-tribal Oklahomans. In addition to the tribe s three casino resort hotels and six other casinos, the Nation has a manufacturing business, a management services company, fourteen travel plazas with mini-casinos, thirteen smoke shops, a printing company, franchised restaurants, ranch operations and a document archiving company. Proceeds from all the tribe s businesses provide the revenue stream to support not only the programs that assist tribal members, including, health care, education, housing, head start and day care centers, community centers, wellness, senior care and other social services, but enable the tribe to support scores of community programs and charities. Despite the Tribe s significant economic progress, the Tribe and its membership continue to have tremendous food-related issues. The Choctaw Nation is designated as a USDA Food Desert, a StrikeForce region where areas of persistent poverty exist, and the first

15 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA 13 tribal Promise Zone, which reflects enormous socioeconomic need within their communities. The Tribe is working to address food-related issues through several initiatives and studies, including this Food Hub Feasibility Study. GEOGRAPHIC SERVICE AREA The geographic and project service area is a vast 10,613 square mile region (larger than the state of Massachusetts), located in far southeastern Oklahoma and is comprised of eleven extremely rural counties: Atoka, Bryan, Choctaw, Coal, Haskell, Hughes, Latimer, LeFlore, McCurtain, Pittsburg, and Pushmataha. The geographic service area service encompasses about 15% of the state s total land base with geographic barriers that include expansive heavily forested areas, plus hilly and mountainous terrain with numerous rivers and streams which separates and extremely isolates communities. Related geographic barriers inhibit the ability to access many basic amenities such as internet services, well stocked supermarkets, public transportation, as well as the ability to gain exposure to local, state and federal programs that support rural agriculture. (Source: CNO Disadvantaged Farm & Rancher Grant Application) CNO Territory includes the following counties: Atoka, Bryan, Choctaw, Coal, Haskell, Hughes, Latimer, LeFlore, McCurtain, Pittsburg, and Pushmataha DEMOGRAPHIC OVERVIEW According to USDA s Food Desert map, over half of the tribal service area is located in a food desert with a great number of low-income individuals having low-access to healthy food options and who face significant food insecurity. Along with the USDA s Food Desert and StrikeForce (high levels of persistent poverty) designations for this region, the Choctaw Nation is the first tribally designated Promise Zone. This 2014 Presidential Promise Zone designation is federal recognition that southeastern Oklahoma is a region with significant social and economic disadvantage and potential for a more promising future. All 11 counties of the Choctaw Nation are among the 32 counties in Oklahoma designated as a USDA StrikeForce region which reveals the dire need to address the many challenges related to chronic rural poverty, including the need to assist agricultural producers. The effects of long-term poverty, unemployment, lack of economic

16 14 Project Background opportunities, high crime rates and low educational attainment are among the many challenges that directly impact the social and economic well-being of all population groups residing in the Choctaw Nation s service area. (Source: CNO Disadvantaged Farm & Ranch Grant Application) TRIBAL FOOD SYSTEM WOMEN, INFANTS & CHILDREN (WIC): The Choctaw Nation has successfully managed projects such as USDA s food distribution program since the early 1980 s and the USDA Women, Infants and Children (WIC) program since 1976 with WIC s current one year food budget totaling $2,058,194. Additionally, CNO s healthcare system, Choctaw Nation Health Services Authority, provides approximately $50,000 in Annual Budgets For Tribal Food Subsidy Programs: WIC = $2,058,194 WIC Farmers Market Vouchers = $50,000 Senior Farmers Market Vouchers = $83,500 Next Step Initiative = $1,500,000 (not exclusively for food) THRIVE Program = $92,768 tribal funds to further assist tribal WIC Farmers Market Nutrition Program (FMNP) participants to purchase local produce throughout their service area. (Source: NIFA-CFP Grant Application) SENIOR MARKET VOUCHER PROGRAM: Beginning in 2014 the tribe has allocated $83,500 of tribal funds on an annual basis to establish a Senior Market Voucher Program so that tribal elders could obtain fresh produce from local growers. NEXT STEP INITIATIVE: Because employed, low-income tribal members voiced a need for access to healthy foods, Tribal leadership implemented the Next Step Initiative to provide fresh foods to those who were over USDA s financial eligibility guidelines. This program was launched in April, 2015 with $1.5 million dollars of tribal funding to provide employable individuals, families or elders with a voucher to purchase healthy fresh foods, receive financial fitness and healthy living education. TRIBAL COMMUNITY CENTERS: The tribe has provided significant financial assistance to CNO Rubin White Health Clinic, Farmers Market Vendors: Jessica fill food security gaps and has provided a Gardner (CNO Tribal Member) and Norma Qualls, July 2017 site at each of the 17 community centers for local growers to have a place to sell produce on a regular basis. (Source: NIFA-CFP Grant Application) RETAIL FOOD OUTLETS Choctaw Country Marketplace: In 2015 the Choctaw tribe purchased the only grocery store in Clayton, Oklahoma which had been closed for two years and opened the

17 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA 15 Choctaw Country Marketplace in Clayton, OK in January, The tribe seeks to provide the over 900 residents with access to healthy and fresh food options as well as linking local growers with viable economic advantage in providing fresh fruits and vegetables to the grocery store. THRIVE Program: The tribe also manages a THRIVE program funded at $92,768 to increase availability and intake of vegetables and fruits by tribal members at the tribe s travel centers (Source: NIFA-CFP Grant Application) Farmers Markets: The CNO Territory includes 27 Farmers Market locations (listed below). Atoka Durant Hugo Coalgate Poteau Talihina Valliant Idabel McAlester Krebs Tribal Community Centers (17 locations) Pittsburg County Farmers Market, McAlester, OK, July 2017

18 Food Industry Supply Chain Food Industry Supply Chain The Appeal of Food Hubs The interest in food hubs come from communities that are seeking to create more scale for their local foods initiatives. In many communities, the farmers markets and CSAs have shown demand for local foods. However, the larger wholesale and retail customers are not well-served by these sales outlets, and attempting to consistently buy in larger quantities from individual farmers is challenging to say the least. This has led to the desire to more efficiently aggregate products from multiple farms to serve the needs of the large retailers, food service distributors, schools or other institutional buyers. The local foods movement has been embraced by policy makers at the federal, state, and local levels, and by a wide range of University and non-profit organizations. Many initiatives are being implemented around the country, with a variety of different services being offered to farmers and include different go-to-market strategies. The end goal in most food hub concepts is to create an effective mechanism to aggregate a large-enough volume of local food products to serve the local food system in a way that helps increase markets and profitability for local farmers and value-add food producers, while also increasing access to healthy food for local consumers, particularly those who currently have limited access. The Nationwide Food Hub Landscape According to the Food Hub Database maintained by the Wallace Center Good Food Network, there are 215 food hubs in the U.S. Food hubs come in many different forms. They include legal structures such co-ops, non-profits, LLCs, B-corps, and S-corps, and sole proprietorships. They provide a variety of services including farmer training, aggregation, packing/repacking, storage, value-added processing, sales, and delivery. They employ a range of business models including direct-to-consumer/retail, cross-docking brokerage, stocking distributor, and online/virtual. Many food hubs also have a social mission which may include farmer training, nutrition education, or shared-use kitchens, among others. As with most operations, form follows function. Food hubs are constrained by the seasonal ag production limitations of their region. An obvious example would be to compare the fresh produce opportunities in Texas versus Alaska. Food hubs in these locations would function differently.

19 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA 17 Food hubs that become financially viable are required to find the right combination of product mix, customer mix, brokering, distribution, pricing, and efficient operations in order to become financially self-sustaining. Food Hubs in the U.S. - The Wallace Center The Established Food Supply Chain In the established food supply chain in the U.S., farmers typically sell to a stocking distributor, who stores inventory, breaks it down into smaller quantities that they aggregate with a wider-variety of food products and deliver to retail stores and restaurants. The trend among food retailers has been consolidation and the establishment of a direct shipment model where a large retailer (e.g., Costco) has its own central distribution center. The food supply chain has the following basic components: 1. Aggregate high quality, homogeneous, and traceable product from farms 2. Offer efficient customer ordering systems at competitive prices 3. Physically take the product from the farm and deliver it to customers Food hub business models can take many forms, but they need to either do all of these things or be part of a value chain of businesses that do them. Table 1 shows the details of the Conventional Food Sales and Distribution Model as compared to a Food Hub Model.

20 18 Food Industry Supply Chain FOOD SALES AND DISTRIBUTION CONVENTIONAL FOOD MODELS VS. FOOD HUB MODELS VALUE CHAIN Grow Food Quality Assurance (QA) Field Packing and Cooling Semi-truck Scale Shipping Aggregation & Cooling Value- Added Processor Sales Individual Stores, Restaurants, Institutions Case- Quantity Route Distribution Customer Service CONVENTIONAL FOOD MODELS Large Importers X X X X X Large Producers X X X X X X X Brokers X X Terminal Markets, Auction Houses X X DC s for large retailers and restaurants X X X X X X Distributors X X X X X X FOOD HUB MODELS Cross-Docking Broker Full Stocking Distributor Value-Added Processor Value-Added Product Sales X X X X X X X X X X X X X X X X X X X Table 1 University of Wisconsin Extension, Food Finance Institute Food Hub Competition In order to better understand the competitive landscape for food hubs, consider the financial performance of 2 publicly-traded full stocking distributors: 1) United Natural Foods, Inc., (UNFI) and 2) Sysco, Inc. (SYY). A snapshot of the most recent annual report is provided in Table 2 below.

21 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA Figure 2 - This is ONE aisle in a UNFI warehouse. This demonstrates the Scale of competition in a very low-margin business. Typical Farmer + Distributor net income = 3.5% TOTAL PUBLICLY-TRADED STOCKING DISTRIBUTOR FINANCIAL BENCHMARKING In Millions of USDs; as of 7/1/2017, 52 Week Trailing UNFI # Sysco % # % Sales $ 9, % $ 55, % COGS 7, % 44, % GROSS PROFIT 1, % 10, % NET INCOME % 1, % Cash % 870 Working Capital % 1, % LT Debt % 7, % NET CHANGE CASH % -3, % -5.5% Note the following commonalities: Net Income <2% Gross Profit Margin <18% Net Change in Cash <0% Presumably, these large companies benefit from significant economies of scale. This is a capital intensive business model that requires significant investment in warehouse facilities, cold storage, and trucking fleets. And when distributing fresh produce these 19

22 20 Food Industry Supply Chain companies are dealing with a perishable item that has virtually no product differentiation for wholesale customers a food hub s inventory is a perishable commodity. These financial benchmarks can be thought of as a Best Case Scenario for Stocking Distributor Food Hubs. Smaller distributors are less efficient and will face the same pressures as these large distributors. These are the same market pressures that will faced by a food hub.

23 Market Analysis: Part 1 Ag Production within CNO Territory One of the primary factors in determining the feasibility of a food hub is the experience, production capacity, and on-farm infrastructure of the region s farmers and ranchers ( Ag Producers ). This study evaluated Ag Producers of fresh produce, nuts, proteins, and value-added food products. The research included an online survey that was distributed to all of the farmers that are registered in the region s Farmers Market Directory as well telephone and on-farm interviews. Overall, it was challenging to identify Ag Producers with significant scale and experience in growing for commercial markets. None of the 31 survey respondents had annual farm sales that exceeded $50,000 in revenues, and 64% of them earn <$5,000 per year. This indicates that one of the first steps in strengthening the regional food system will involve significant capacity-building of the Ag Producers. Market Analysis: Part 1 Location of farmers with less than four years experience farming Location of farmers with four or more years experience farming

24 22 Market Analysis: Part 1 The primary challenge here is with location there is no single concentration of farmers around which a strong initial production base can be built. That said, the area east of Durant, including along the Red River, seems to offer good potential both in terms of the quality of soils and the presence of a handful of larger capacity farmers. We did, however, meet with a handful of farmers who appear ready and eager to grow produce on a significant scale (10-50 acres). None of the 31 survey respondents had annual farm sales that exceeded $50,000 in revenues, and 64% of them earn <$5,000 per year. FRESH PRODUCE Current production capacity Though we have not been able to connect with the Valliant Farmers Market growers since the initial site visit in April, there appears to be several farmers there, perhaps five to six, who are ready to grow for a food hub. In terms just of acreage needed, this group could easily produce enough to meet the demand of a CSA-focused food hub in the first few years. These growers seem most likely to fill the role of anchor farmers. The northeastern part of the CNO Territory has a core group of farmers with a high-level of interest in expanding the local food opportunities, although it currently does not appear to have a critical mass of larger and more experienced growers. The largest mixed-vegetable grower is Wild Things Farm, primarily a u-pick farm located in Pocola. They currently farm on 25+ acres and have significant on-farm infrastructure. They have the capacity to supply a food hub, but said they want to learn more about it. There is also Knot Hole Farm, a husband and wife team growing on 2-acres in Leflore County. They

25 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA are currently committed to making a full-time living for their family as mixed vegetable, market farmers and have expressed a high-level of interest in supplying a food hub. Additionally, some of the larger and more experienced farmers currently selling at the Durant and McAlester markets could also be brought into the production base, assuming that pricing will be sufficient. The primary concern Mark Hale, Knot Hole Farm, Cameron, Oklahoma, July 2017 with the Valliant farmers is with quality and consistency - an issue for many food hubs, especially in the early years. Some of these concerns come out of what is for sale at the Valliant Farmers Market, a substantial proportion of which was below the quality standards the food hub would need, even for a CSA. Overall interest in the food hub is fairly widespread among farmers who responded to surveys or were interviewed. Demand, pricing and logistics notwithstanding, it s reasonable to project producers growing for the food hub within the first three years. We believe that the main challenge with this broader group of farmers would be overall reliability, particularly around quality and consistency (i.e., having products when they re scheduled to have it and the food hub needs it). There are a number of steps that can be taken to increase growers reliability, some of which are discussed below. Based on 31 Ag Producer Survey Responses 23

26 24 Market Analysis: Part 1 OTHER LOCAL AG PRODUCTS NUTS: The Choctaw Nation owns 6,500 pecan trees that they harvest and process for retail sale in the tribal food outlets. A portion of this harvest would be available to supply a CNO Food Hub for DTC or wholesale accounts. FRUITS: The CNO Territory contains one commercial orchard, the Riggs Family Orchard, in Spiro, OK. The orchard includes 4,000 plants with a mix of peaches, nectarines, and blackberries. They serve region wholesale accounts as well as an on-farm market stand. While they expressed an interest in learning more about a potential food hub, they expressed a high level of concern regarding the new FSMA Food Safety Regulations. MEATS: The CNO Territory includes several cow-calf operations, including a CNO-owned ranching business with both cattle and bison herds. There is a grass-fed beef operation with +/-100 head of cattle in Leflore County that processes meat at a local butcher shop for sale at the Oklahoma Food Co-op. The primary limiting factor with potential meat supply is that there are no USDA-inspected processing facilities in the CNO Territory. There are several state-inspected butchers, but this would limit sales opportunities for wholesale accounts. Handling meats within food hubs is also more expensive because it requires on-site freezers and additional food safety compliance requirements. Choctaw Nation of Oklahoma - Red Angus cattle approach a fence line at the northwest corner of Winding Stair Ranch PROS AND CONS OF GROWING FOR FOOD HUB AND OTHER, EXISTING MARKETS: The main benefit small farmers derive when growing for a food hub and their own markets is increased market share. As food hubs grow, they can represent a major increase in the total market available to farmers, a market expansion that the farmers themselves to not have to develop and maintain. The primary disadvantage, simply put, is that with food hubs, a farmer s quality must increase while the price he/she receives declines, at least to some degree. This trade off works for some farmers but certainly not for many others. Growing for both markets also requires farmers to plan more precisely and to manage their crops very well.

27 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA 25 POTENTIAL PRODUCTION CAPACITY AND WHAT S NEEDED TO INCREASE/ IMPROVE IT If the primary market for the food hub is CSA customers, the primary challenge will be in growing a sufficient diversity of crops, week in and week out, rather than any limits to total production. Should the food hub add larger buyers, beginning with the CNO casinos and eventually adding larger wholesale purveyors, then training will be needed to be able to step up supply, improve production efficiencies (to meet lower price buyers) and to meet more strenuous commercial standards. This may be available through existing Extension and OSU personnel, though that needs to be clarified and confirmed. It may also be useful to develop a producers network or co-op, which can cultivate peer learning and support and increase the overall buy-in from farmers. Producer networks also make production planning more efficient and can become a means for accessing lower cost inputs, equipment and even group certifications (GAP or Organic). The primary disadvantage, simply put, is that with food hubs, a farmer s quality must increase while the price he/ she receives declines, at least to some degree. This trade off works for some farmers but certainly not for many others. Based on 31 Ag Producer Survey Responses ON-FARM INFRASTRUCTURE CURRENT CAPACITY AND WHAT S NECESSARY Cooling, freezing, washing and grading, transport - In general, most farmers who responded to surveys have little to no on-farm infrastructure for post harvest grading, washing, cooling and transportation. Establishing a minimum of such infrastructure on these farms (or potentially shared by small clusters of farmers in close proximity) will have to be a priority for the food hub to meet quality and food safety standards. It will have the added benefit of increasing farmers overall capacity and capital.

28 26 Market Analysis: Part 1 PRICE It s difficult to know exactly what prices will be acceptable to different farmers, until the details are worked out with CSA customers and buyers. At this point, it seems clear that farmers who sell primarily at the Durant market (and possibly the McAlester Farmers Market) are likely to be more price-sensitive than the larger growers selling through the Valliant Farmers Market. Thus they are better suited to grow for a CSA, along with any other DTC markets that might be developed. It is plausible to imagine that some of these farmers might also produce for small to midsized wholesale markets, such as the casinos, if a compromise price can be reached on various items.

29 Market Analysis: Part 2 Customer Base within CNO Territory The other primary factor in assessing the feasibility of a food hub is the level of interest in the local market to purchase more locally-produced foods, often at a higher price than the conventional food system. The advantages to the consumer include supporting their local economy while potentially buying a fresher product. To evaluate the demand for local foods in the CNO Territory, we surveyed and interviewed all categories of potential customers: consumers, restaurants, grocery stores, institutions, and distributors. The research included an online survey that was distributed to all of the CNO employees to gauge the level of interest in a workplace CSA program, as well as Buyer Surveys that were focused on food resellers, restaurants, and distributors. Overall, there appears to be support among individual consumers for a CSA Program that sources from local Ag Producers. Among the larger buyers, the regional grocery store chains and restaurants showed virtually no interest in buying from a food Summary of the Market- Readiness for More Locally- Sourced Foods by Outlet: Direct-to-Consumer CSA Distributors Institutions Restaurants Grocery Stores Market Analysis: Part 2 Based on Buyer Survey Responses

30 28 Market Analysis: Part 2 hub if it meant paying a higher price. Among the institutions, there are no Farm to School Programs within the CNO Territory. The Choctaw Nation does own and operate three large casinos with fairly substantial food and beverage programs Managers of these operations verbally indicated that they would support the establishment of a CNO Food Hub, although they did not indicate that this was in-demand from their customers. However, conversations with the region s two primary distributors, Fresh Point and Go Fresh, did indicate a strong demand for more locally-sourced fresh produce. FreshPoint, the country s largest distributor of fresh produce, is looking for more local sources and appears interested in working with CNO to develop and build a supply to meet their demand. This could provide a very large market base, potentially of several million dollars annually. However, they are offering little if any price premium, a fact that will limit the number of farmers able or willing to grow for them. DIRECT-TO-CONSUMER CSA: Based on surveys and focus groups, it seems feasible to project a start-up volume of CSA shares, primarily at the Durant headquarters of CNO, growing by 100 to 200 per year for the first few years. Depending upon the quality of the products, the convenience of pick-up, and the support of CNO as an employer (making payments easier or lower through subsidies), it s ambitious but reasonable to project shares within the Durant complex, with another customers in other CNO worksites by the 4th or 5th year of the food hub. For a 20 week share, this would equate to $300,000 to $500,000 in gross revenue from this source, equivalent to approximately $60,000-$100,000 in funds for operations. Choctaw Casino Durant - Buffet Restaurant RESTAURANTS: There are no farm-to-fork style restaurants identified in the CNO territory. However, CNO operates 18 casinos throughout southeastern Oklahoma including 3 properties with full-service restaurants and hotels located in Durant, Pocola, and Grant. Based on industry averages for comparably-sized casinos, these full-service properties spend an estimated $15-$20 million on food purchases, $750,000-$1,000,000 of which is for produce (a figure which includes citrus, bananas and other items that cannot be

31 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA 29 produced locally). These properties currently purchase their food from large, wholesale distributors such as Sysco, and they do not have a market-driven need to buy more local food products. In fact, it will probably be very challenging/disruptive for them to change their procurement practices to try to accommodate a food hub supplier that is sourcing only local product on a seasonal basis. However, this could represent the best 1st wholesale customer for a CNO food hub due to common ownership that is committed to the greater good of the CNO territory. RETAILERS: Several grocery stores were contacted to determine their level of interest in sourcing more local foods. This includes CV s, Marvin s, Pruett s, and Braum s. None of these retailers expressed a strong desire to source more local foods through a food hub. However, CNO operates the Choctaw Country Market in Clayton, OK which includes a THE BIGGEST CHALLENGES BUYERS FACE IN SOURCING LOCALLY RANK AS FOLLOWS: 1) Can t get enough volume 2) Supply is inconsistent or unpredictable 3) Quality is inconsistent or unpredictable Choctaw Country Store, Clayton, Oklahoma, Ribbon Cutting Ceremony, August 2016 Signage promoting locally-grown okra, Marvin s Grocery Store, Spiro, OK, July 2017

32 30 Market Analysis: Part 2 Highlights from the Buyer Survey: 100% of Buyers are NOT willing to pay more for local produce 100% felt that their CUSTOMERS would NOT be willing to pay more for local produce 100% are NOT willing to pay more for ORGANIC combination of a small grocery store, deli, and c-store format that reportedly spend $1,000 - $1,500 per week on fresh produce. This could represent another friendly 1st customer for food hub service expansion to retail outlets. Furthermore, CNO spends approximately $90,000 per year on the THRIVE Program that makes fresh fruits and vegetables available in the Tribe s 11 convenience stores. A portion of this fresh produce could potentially be supplied by the food hub. INSTITUTIONS: This market segment includes hospitals, PreK - 12 schools, and colleges/universities. The CNO Territory does not have any Farm-to- School Programs in operation. However, during a site visit to Southeastern Oklahoma State University in Durant, their Food Manager expressed an interest in learning more about the potential to purchase from a food hub. The signage in their cafeteria promotes that fact that they purchase from Oklahoma farmers. They would potentially be a good starting point for institutional sales effort if a food hub is developed in the Durant area. DISTRIBUTORS: Conversations with two large distributors indicate a high level of interest in buying more locally-sourced, fresh produce. Both Freshpoint (a division of Sysco) and Go Fresh, an independent distributor based in Tulsa, indicated that they had excess demand for local, fresh produce. Freshpoint stated that the potential demand is very large, ranging from 100 to 2000 cases per week of different produce items. However, the price they are currently paying is rather low, largely in line with most other wholesale buyers. The benefits of selling to a large distributor are primarily related to scale - a single customer with the ability to order very large volume on a regular basis with minimal staff maintenance (as compared to selling DTC or a few cases per week to multiple restaurants). However, wholesale accounts will be willing to pay the least, and will likely require high levels of food safety compliance. They will also expect very high quality with consistent packing practices. There do not appear to be enough Ag Producers in the CNO territory to support this market segment.

33 Market Analysis: Part 3 CNO Competitive Advantages PROCUREMENT POLICY: As a sovereign government, CNO has the ability to control policies related to local food procurement that could be applied/dictated across all of the CNO-controlled food purchasing entities such as the casinos (18 locations), grocery/cstores, and health centers. For example, CNO could establish a preferential purchasing policy that favors ag/food products that are sourced within the CNO territory. This policy could provide a pricing advantage (i.e., within 20% of next lowest bidder) at least in the early years to help the local food system expand in scale and scope. For example, if CNO s three largest casinos each spend $15 million per year on food ($45 million total), and 5% of that is fresh produce, that would represent $2.25 million in fresh produce purchases. If a CNO Food Hub is able to supply 5% of that demand this would represent $112,500 and 10% would be $225,000. This is a theoretical potential; we believe that practically speaking, it is unlikely that this market will exceed $100,000 after several years. SUBSIDIZING FOOD PURCHASES: CNO has established several financial subsidy programs to encourage healthy eating, and should be able to direct their use to specific food outlets or to redirect a portion of these funds towards a CNO-controlled CSA program. WIC Farmers Market Vouchers: $35,000 Sr. Farmers Market Vouchers: $60,000 THRIVE Program: $92,000 to increase fresh food access in convenience stores Next Step Initiative: $1,500,000 (only a portion of which is food) LARGE EMPLOYMENT BASE/PAYROLL DEDUCTION: CNO employs +/-6,000 people throughout southeastern Oklahoma including tribal government, casinos, and various enterprises. This offers a unique ability to support CSA drop sites are large employment centers, including marketing and promotion efforts. Furthermore, CNO should be able to offer payroll deduction to improve the affordability of a CSA initiative. A small subsidization of CSA shares, as part of overall health and wellness goals, would significantly increase the number of likely CNO employees purchasing a share. For example, a 20% cost share with employees would cost CNO $25,000 per year for 250 participating households. ACCESS TO GRANTS: CNO s status as an Empowerment Community has provided significant access to grant funding to support rural business development, ag enterprises, and feasibility studies, among others. It is reasonable to assume that CNO would be able to cover part of the start-up expenses through grant funding. ACCESS TO LAND: CNO has significant land resources which could potentially be offered to high quality Ag Producers that were seeking access to more farm-land. Specifically, Market Analysis: Part 3

34 32 Market Analysis: Part 3 the Tribe s ranch lands along the Red River offer the best farmland in southeastern Oklahoma. Summary of CNO Market Conditions It is the opinion of the Consultants that overall, the local food system in the CNO region is relatively undeveloped at this point. This means that recommendations to grow and strengthen the local food system must begin with a focus on the essential building blocks of a local food system, rather than moving to more sophisticated and challenging initiatives in the short run. The largest problem with Oklahoma grown produce is the shelf life. Weather during the growing season prevents longer shelf life. Buyer Survey comment

35 Food Hub Business Models Selecting a Business Model that provides the best fit for the local market conditions is critical to achieving financial sustainability. Food hubs across the U.S. come in a wide variety of business models that offer a range of products and services, and most of them struggle to achieve financial viability. This study evaluated both retail and wholesale business models including two approaches to wholesale. Direct-to-Consumer MULTI-FARM CSAS: The same basic business model as an on-farm CSA, wherein customers pre-pay for a share of the seasonal harvest of a farm. The multi-farm model purchases products from multiple farms to provide a wider-variety of products often including value-added food products. CSAs most commonly sell directly to individuals. Food Hub Business Models Wholesale STOCKING DISTRIBUTORS: Also called Aggregation-Distribution, purchases large quantities (typically pallet or truckload quantities) at wholesale (or better-than-wholesale) prices from a wide range of suppliers, hold them in inventory, and then sell and transport smaller quantities of a range of products to a wide variety of smaller retail and/or food service businesses. Most commonly sells and delivers to grocery stores, restaurants, and/or institutional food service outlets. This is the most common type of food hub and offers the highest impact on the local food system. Figure 3 - Wisconsin Food Hub: Cross-docking Brokerage Facility

36 34 Food Hub Business Models CROSS-DOCKING BROKERAGE: Act as a sales agent and organize suppliers to consolidate shipments at a central facility without purchasing & holding inventory. Most commonly selling to distributors or large value-added processors. This is a downsized wholesale model that may be considered an interim step to becoming a Stocking Distributor. Business Model: Direct-to-Consumer CSA CSAs or other direct-to-consumer (DTC) markets are helpful to a food hub several ways, particularly during the start-up and early years. CNO WORKPLACE-BASED CSA: We estimate the potential for CSA shares in year one, growing to approximately shares over the following two to three years. During this first phase of a food hub, space, cooling and other facility requirements should be quite modest (for this part of the food hub at least), with 1000 square feet of warehouse space for grading and packing, cooler space of square feet, a small office space, and, preferably, a loading dock for a van or small delivery truck. Should the CSA reach the maximum projected number of 1000 shares, the warehouse and cooling space would need to approximately double. It should be noted that these space requirements assume that incoming produce moves through the facility within about 48 hours, rather than being stored for any length of time. WORKPLACE-BASED CSAS BEYOND THE REGION: We have not examined this in detail. However, it does appear that Tulsa offers the potential for several large, health and wellness-oriented employers who are not now being served by a CSA. Should the CNO food hub become established, this would be worth exploring in more detail in latter years, balancing the large sales potential with the increased management, logistics and distribution challenges it would present. FARMERS MARKETS: While it is not commonplace for food hubs to sell at farmers markets, it has been done. If it could be done in such a way as to enhance farmers markets in Durant and McAlester, this would provide good outreach to potential customers and a modest additional market for the hub. Adding two or more farmers markets as food hub customers would increase the packing and management requirements, but should not necessitate additional packing or cooling space. EQUIPMENT & STAFFING: Both will be influenced by whether or not CSA shares are preboxed for each shareholder, which requires far more work at the central packing facility (ie, the food hub location),or delivered to pick-up sites in case quantities, wherein people pack their own boxes or baskets in a farmers market or buffet style distribution. In either scenario, food hub staff will have to organize and pack the appropriate products for each CSA pick-up site from among produce deliveries from multiple farmers. Equipment needed for a CSA based hub will include: 1. stainless steel tables for packing and organizing, beginning with linear feet of these tables; 2. at least one washing station for produce (above and beyond employee sanitary facilities), along with sufficient floor and drains;

37 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA a minimum of two pallet jacks for moving cases from farmer trucks to packing areas, in and out of coolers, and for loading onto delivery vehicles; 4. shelves or racks for storage of boxes and supplies, and possibly for vertical storage of produce within the coolers; 5. at least two commercial-grade digital scales at the outset; and 6. a laptop equipped with management, inventory management, billing and other needed software. STAFFING DURING START UP PHASE: The three most essential functions for a CSA-based food hub during the early years are: Marketing and sales, which includes outreach to different CSA workplace venues and key leaders there, as well as other potential employers in the region; customer recruitment and education to secure a broad base of shareholders prior to the start of each season; and a range of customer service, communication and problem solving duties. Estimate hour per week, on average. Food Hub Management, which would include overall management of the business, as well as overseeing the volunteers and/or staff responsible for CSA Pick-up, Buffet-Style that allows customers to select their own produce for their weekly basket which saves on packing labor for the food hub. aggregation and distribution. Estimate full time during the growing season, part time for the balance of the year, for the first 1-3 years. Farmer outreach and support, focused particularly on coordinating production planning to meet food hub market demand, educating farmers on standards and procedures for harvesting, post-harvest handling, grading and food safety, and identifying and recruiting new farmers as needed. Estimate half to three quarter time in years 1-3. Total staff needs, not including truck drivers and packing staff - three professional staff, working approximately hours per week, averaged out over the course of the year. DISTRIBUTION/DELIVERIES: Many food hubs debate the lease vs buy question, with pros and cons on both sides. Most food hubs with which we are familiar eventually choose to own their own trucks, even if they also lease or subcontract out some of the peak capacity they might need. For a start up food hub with 500 or fewer CSA shares, a large cargo van or a 12 refrigerated truck should be sufficient to manage the volume of product in the first 1-3 years, at least until wholesale accounts are added. ADVANTAGES OF A CSA MARKET INCLUDE: Better pricing than most wholesale accounts, which benefits both the farmers and the food hub itself, given the slim margins that must be maintained. Pricing for comparable items is often % higher in a DTC market (Example: Tomatoes in a CSA

38 36 Food Hub Business Models basket valued at $2/lb, compared with a typical wholesale price of $16-$20/20 lb box, or $.80-$1/lb) Somewhat easier grading and quality standards. This does not mean that quality in a CSA can be less than excellent, but it does mean that such customers have less of an expectation of perfect, uniform produce items. Because of the two factors above, the food hub can accommodate smaller, less experienced farmers to some degree, since strict aesthetic standards and larger quantities are not as critical. Offer a good way to build the brand of the food hub and directly connect with consumers. All of the comparable food hubs we ve examined used this strategy to help get established and known in their areas. SOME DISADVANTAGES OF A LARGE RELIANCE ON CSA OR OTHER DTC MARKETS INCLUDE: Limits to growth potential and high labor requirements to build the market. The food hubs we ve considered grew at widely different paces, with some reaching CSA shares within the first three years to others adding new customers per year. The growth potential is generally much slower for rural regions, though the presence of CNO as a major and relatively concentrated employer would help offset this to some degree. Nevertheless, building up a CSA market almost always takes much more time than adding midsize to large wholesale accounts. CSA baskets need to be diverse and interesting to grow the market base and to retain customers (always a big challenge for CSAs). This provides an opportunity to grow more things, but it is also a challenge to produce a wider array of items throughout the season. Most people lose interest over time, requiring a high rate of new customers each year to replace those who opt out. This is a widespread challenge among CSAs of all types. Depending upon the strategy used, packing the CSA shares requires a lot of coordination and work. In a couple of the cases we examined, this was done primarily by volunteers for the first several years, though the volunteers themselves still must be recruited, trained and managed by staff. Business Model: Wholesale SQUARE FOOTAGE: In terms of physical facilities, food hubs serving wholesale customers range from 5,000-10,000+ square feet. A food hub that starts by serving tribal casinos and maybe a few other local, wholesale accounts would not require more than 2,000 square feet of space. However, in order to scale-up and achieve financial viability, there should be room to expand up to +/-7,500 square feet if possible. This space will need to include area for office, processing, warehouse, and cold storage. EQUIPMENT: The facility will need a walk-in cooler, stainless steel tables, roller/assembly lines for packing, and a wash station with dunk tank. Depending on the product-mix, there may be a need for a flake ice maker. As deliveries extend beyond a minute drive, the food hub will need to lease or purchase a refrigerated delivery vehicle to

39 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA 37 maintain a cold supply chain for food safety, record-keeping purposes. As the food hub expands its customer base it will want to include a forklift to handle the volume. IT / INVENTORY MANAGEMENT: Effectively managing inventory is an important factor in a successful food hub operation. Fresh produce has a limited shelf-life, and can quickly lose its value. Managing inventory can be a major challenge since wholesale/institutional customer demand can fluctuate on a daily (restaurants), weekly (grocery store), and monthly (farm-to-school) basis. From the farm perspective, the harvest is largely driven by mother nature. Therefore, a key tool for the food hub will be an inventory management system that is able to coordinate farmer planning early in the season, while trying to balance supply and demand during harvest and delivery. STAFFING: A wholesale operation could begin with a full-time General Manager, who would need to double as the Marketing and Sales Manager, and a full-time Production Manager, with the expectation that both staff will wear multiple hats including sales and record-keeping during the start-up phase of operations. These staff will need to hire part-time held during the seasonal peaks of 2-4 additional staff for packing and delivery operations. As the business grows to become financially-viable, it will employ approximately 7 full-time staff to perform specialized functions including: General Manager, Sales, Production, Packing/Logistics, Deliveries, Food Safety Compliance, and Bookkeeping. If the food hub has a social mission beyond just the financial performance of the food hub (i.e., farmer training), there may need to be an extra worker (or partner) to provide those services. WORKING CAPITAL: By definition, working capital is the difference between current assets and current liabilities. In other words, it represents the cash required to cover the cost of acquiring inventory (paying the farmer) + sorting/packing (labor) + packaging and related supplies + delivery expense while waiting to get paid by the customer. Wholesale customers typically pay monthly, which could require the food hub to have 30-days of working capital available. And, as wholesale sales increase, the food hub will need more working capital (i.e., cash) to ensure that the bills are able to be paid while waiting on the customer payment....as wholesale sales increase, the food hub will need more working capital to ensure that the bills are able to be paid while waiting on the customer payment. REQUIRED SALES LEVELS: Typically, food hubs that serve wholesale accounts will need to reach annual sales of at least $3.0 million per year in order to breakeven. This range is heavily dependent on the split with the farmers, and could easily exceed $3.0 million if the farmers have very favorable terms, margins are low, or costs of aggregation and/or distribution are above average. Breakeven represents the point at which sales are covering the cost of production. However, there is still not enough revenue to cover interest, depreciation, or taxes. Based on benchmarking studies, a wholesale food hub can become viable in the $2.5-$3.0 million sales range.

40 38 Food Hub Business Models Based on benchmarking studies, a wholesale food hub can become viable in the $2.5 - $3.0 million sales range. FARMER BASE: Supplying the wholesale market would be a challenge for the existing base of Ag Producers in the CNO Territory. The wholesale market will require a higher level of quality, a consistent supply, and pay lower prices (as compared to DTC). This would require the local farmers to be willing and able to scale-up, and there would need to be upgrades to the on-farm infrastructure to support season extensions and on-site cooling. Furthermore, it would be preferable for a food hub to have strong food safety requirements for its suppliers in order to build confidence in the market. There are no existing farm operations in the CNO territory that currently have GAP certification. OUTSOURCING: subcontract portions of aggregation, distribution and related services The food hub will likely outsource some functions during the start-up phase, and possibly on a permanent basis. Some of the staffing requirements will be based on the operating model/agreements that are put in place with the Ag Producers, such as will the produce be delivered to the food hub, or picked-up on-farm? The food hub may also be able to outsource deliveries to an existing fresh produce distribution company, such as Freshpoint or Go Fresh, to leverage their existing fleet of refrigerated trucks and drivers. The accounting functions should be outsourced during the start-up phase until bookkeeping requirements can justify a full-time, paid staff person. It should also be stated that this is a very important function that is required to monitor the financial performance of the operation. This activity needs to be performed with a high level of competence which may only be affordable by outsourcing. OPERATIONS ISSUES AND CHALLENGES: The core functions of a food hub serving wholesale customers includes aggregation, packaging, and delivery. The basic role of aggregation is to receive ag products, sort according to quality, and package according to customer requirements. However, it can be a difficult balancing act between supply and demand which requires a great deal of skill and experience related to ag production, and the needs and requirements of the wholesale customers (as described above). Potential and costs of decentralized, sub-hub approach: Some food hubs have established a sub-hub approach when they are serving a large geographic area. This model establishes smaller venues to aggregate produce in a remote region into a large enough quantity for distribution (either direct to customers or to the central hub). This model allows a food hub to expand its reach, and the related benefits, to more Ag Producers. In turn, the food hub gains access to a larger supply base. However, this requires additional facilities, equipment, and labor that can be underutilized and inefficient. It also adds another touchpoint which increases costs. This can be tough to absorb in a low-margin operation.

41 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA 39 Projected revenues and costs, years 1 3 YEAR 1 EXPENDITURES PERSONNEL Full time Operations Manager Contract labor (Deliveries, misc) $50,000 (salary and fringe) $ 4,000 (20 wks, 10 hr/wk, $20/hr) Support staff (admin, accounting, time) $ 8,000 Subtotal, Personnel $62,000 NON-PERSONNEL COGS (produce purchases, at 75% of sale price) $112,500 COGS, boxes, bags, etc $ 1,500 Product loss, at 10% $ 15,000 Facility lease, 6 $1000 $ 6,000 Delivery vehicle rental (van) 6 $ 9,000 Utilities, 6 $500 $ 3,000 Insurance $ 2,000 Maintenance and repairs (Scales, etc) $ 1,000 Subtotal, Non-personnel $150,000 CAPITAL START-UP Sorting tables, two scales, pallet jack $ 10,000 Total Expenditures $222,000 REVENUES Total Produce sales $150,000 Grants and contributions $ 72,000 Total Revenues $222,000 Business income shortfall $ 72,000

42 40 Food Hub Business Models YEAR 2 EXPENDITURES PERSONNEL Full time Operations Manager Contract labor (Deliveries, misc) $51,000 (salary and fringe) $ 6,000 (20 wks, 10 hr/wk, $20/hr) Support staff (admin, accounting, time) $ 8,000 Subtotal, Personnel $65,000 NON-PERSONNEL COGS (produce purchases, at 75% of sale price) $187,500 COGS, boxes, bags, etc $ 4,000 Product loss, at 5% $ 9,375 Facility lease, 6 $1000 $ 6,000 Delivery vehicle rental (van) 6 $ 9,000 Utilities, 6 $500 $ 3,000 Insurance $ 3,000 Maintenance and repairs (Scales, etc) $ 2,000 Subtotal, Non-personnel $223,875 CAPITAL START-UP Additional Equipment $ 5,000 Total Expenditures $293,875 REVENUES Total Produce sales $250,000 Grants and contributions $ 43,875 Total Revenues $293,875 Business income shortfall $ 43,875

43 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA 41 YEAR 3 EXPENDITURES PERSONNEL Full time Operations Manager Contract labor, deliveries Contract labor, packing $52,500 (salary and fringe) $13,200 (20 wks, 30 hr/wk, $22/hr) $ 12,000 (20 wks, 40hrs/wk, $15/hr) Support staff (admin, accounting, time) $ 10,500 Subtotal, Personnel $88,200 NON-PERSONNEL COGS (produce purchases, at 75% of sale price) $225,000 COGS, boxes, bags, etc $ 6,000 Product loss, at 5% $ 11,250 Facility lease, 12 $2000 $ 24,000 Delivery vehicle rental 2 vans, 12 mos, $1500 $ 36,000 Utilities, 12 $1000 $ 12,000 Insurance $ 4,000 Maintenance and repairs $ 3,000 Subtotal, Non-personnel $321,250 CAPITAL Additional Equipment $ 2,500 Total Expenditures $411,950 REVENUES Total Produce sales $300,000 Grants and contributions $111,950 Total Revenues $411,950 Business income shortfall $111,950

44 42 Food Hub Business Models Business Model: Comparison of Key Requirements for Financially Viable Operations DTC MULTI-FARM CSA WHOLESALE CROSS-DOCKING BROKER STOCKING DISTRIBUTOR Physical Assets Required Quality Farm Land On-farm Cooling > 10-acres > 100-acres > 100-acres NO YES YES Roads & Transport Infrastructure N/A Road & Bridge adequate for Semi-Trucks Road & Bridge adequate for Semi-Trucks Facility / Warehouse 1,000 3,000 SF dry storage and packing lines 3,000 5,000 SF warehouse 5,000 10,000 SF warehouse Semi-Truck Loading & parking Semi-Truck Loading & Parking Cold Storage SF 500 2,000 SF 2,000-4,000 SF Refrigerated Trucks Limited Need NO Required to maintain cold-chain during deliveries Product Mix Need a wide variety (30 40+) to maintain customer interest Often includes local value-added products such as honey, cheese, peanut butter, etc. Homogenous products in truck-load quantities (i.e., melons) Preference for season extension (more of the same throughout the year) rather than product diversity Requires more variety among products in order to better serve customers. They are accustomed to buying multiple product lines from food vendors for buying efficiency. Supplier Base Need at least 8 10 suppliers that can reliably provide diverse products throughout the CSA term. These can be small scale suppliers growing on 1 3 acres. 5+ experienced growers on 25+ acre farms to achieve scale. On-farm cooling and storage is required. Season extension (i.e., high tunnels) is greatly preferred experienced growers on 5+ acre farms to have a diverse and more predictable supply of a wider variety of products. Season extension is preferred. On-farm cooling and storage is preferred GAP Certification NO YES YES Target Customers Individuals Distributors Large value-added processors Grocery Stores Restaurants Institutional Accounts

45 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA 43 DTC WHOLESALE MULTI-FARM CSA CROSS-DOCKING BROKER STOCKING DISTRIBUTOR Ideal Location Near Customers / Large Employment Centers Need quality, seasonal labor during peaks for receiving, packing and delivering Near farmers Can be rural Need large truck access Low-rent area preferred Within 1-2 hour drive of major metropolitan area is highly desirable Near markets Can be rural Less than 30-minute drive to largest customer base preferred Vast majority of customers within 2-hour drive Revenue Model Pre-paid Subscriptions to fund working capital needs Payment to farmers upon delivery of product that meets requirements Sales commission of 12-14% of total sales typically paid to farmer within 15 days Payment to farmers typically within 15 days of delivery Working capital needed to buy and hold inventory until product is sold and money collected from customers Customer payments typical within days Risk of product spoilage CNO Strengths, Weaknesses, Opportunities, & Threats STRENGTHS In-house employee (customer) base for DTC sales Ownership of several Food Outlets Regional Goodwill Access to Grant Funding and other low-cost capital Available farmland (+/-20,000 acres) Rural location offers low facility costs Existing CNO pecan orchard with 6,500 trees and related value-added products OPPORTUNITIES Strong employee support for CSA concept Leverage existing CNO food subsidy programs Leverage new farm-to-table restaurant (Durant Tribal HQ) Leverage casino F&B outlets High level of interest from wholesale distributors (Fresh Point & Go Fresh) Leverage existing farmer support resources (OSU Extension, Noble Research Institute, Kerr Center for Sustainable Agriculture) Improvements through Farmers Market Promotion Program Grant Significant public support/subsidy available if public benefit justifies it Dallas market (7 million people) WEAKNESSES Limited Ag Producer Base (volume) No GAP-certified farming operations (food safety) Inexperienced Ag Producers for wholesale (quality) Very limited fall/winter Ag Production (hunting) No on-farm cold storage (quality) Less than ideal growing environment/climate Weak Local Food Movement Weak Farmers Markets Price-Sensitive Food Buyers THREATS Management & Staffing Potential for poor financial performance Worse if Under-capitalized Food safety Weather Growth in ready-to-make meal kits versus CSA for high-end customers

46 44 Food Hub Business Models Business Model Recommendations Survey and focus group results appear to indicate that there is sufficient interest and probable demand to launch a workplace-based CSA through CNO with approximately shares in year one. It would be best to begin with a short season CSA of 12 weeks, both to address concerns raised by potential customers (about not committing too much before they ve had some experience with it), and to reduce risk and production management challenges for producers and the food hub. In terms of physical facilities, a 1,000 square foot space, with stainless steel tables, a small walk-in cooler ( square feet) and a couple of pallet jacks should be all that is needed to launch at this pilot level. For purposes of management and labor, a CNO staff person (or someone secured under contract), working hours per week could likely manage promotion and marketing; a second half-time person would be needed for producer outreach, coordination and planning with farmers. This would be a good fit with the current production base and could easily be met with a small amount of carefully planned production. A good rule of thumb for vegetable and CSA shares is that one acre of well-managed, intensive production can supply shares. Thus, for the pilot stage, 7-10 acres of dedicated production might be sufficient, though acres would give the food hub some wiggle room. For the CSA, the growth within the region is probably limited to shares, built up over 3 6 years. That s roughly equivalent to $375,000-$500,000 gross annual revenue. Farmers market sales, should that be included in the market mix, might add $30,000- $40,000 in gross annual revenue. A good rule of thumb for vegetable and CSA shares is that one acre of well-managed, intensive production can supply shares. Thus, for the pilot stage, 7-10 acres of dedicated production might be sufficient, though acres would give the food hub some wiggle room.

47 Organizational/Ownership Structures Importance The legal structure that is selected for the food hub operations plays an important role in the overall operations. For example, a non-profit food hub may pursue financial self-sustainability but its overarching goal is to have a positive impact on the local food system (e.g., to benefit Ag Producers, consumers, or both). Conversely, a privately-held operation will focus almost exclusively on profitability and financial return on investment, generally without significant regard to the local Ag Producers or consumers. The legal structure of the organization also has a direct impact on their access to capital, risk profile, and decision-making process. Organizational/Ownership Structures Publicly-held / Tribal Program CNO is a sovereign nation, and has the ability to establish government programs and/ or departments to provide services to the community. This is a very common structure among Tribal Food Sovereignty Initiatives. PROS 1. potential for complete financial security of staff without regard to financial performance of the operation; 2. legal benefits of sovereign immunity from potential legal actions; and 3. opportunities to link the food hub to other farm, food and health initiatives with which CNO is already engaged. CONS 1. government personnel policies that include generous holidays are often incompatible with the realities of a food hub, particularly during seasonal peaks, and 2. having no inherent incentive to become financially self-sustaining will likely result in quality and performance that are well-below industry standards.

48 46 Organizational/Ownership Structures Non-profit Many food hubs are structured as non-profit entities. CNO also has the ability to form and operate a non-profit entity. PROS 1. access to most types of grant funding including federal/state programs as well as private foundations, 2. ability to focus on making a positive impact related to strengthening the local food system (e.g., to benefit Ag Producers and/or consumers), and 3. this structure sets expectations among key local stakeholders that this operation will focus on providing a community benefit rather than pursue profits. CONS 1. could foster a perception that this should be a low-priority within CNO without regard to considering any other public benefits Privately-held CNO also has the option to form a tribally-owned enterprise that operates primarily to earn profits. The Tribe owns and operates other businesses under this structure such as the casino operations. PROS 1. inherent incentive to earn a profit which creates a sense of urgency for efficient operations, and 2. access to traditional financing sources such as bank loans. 3. could be structured to sell at some point in the future if CNO wanted to exit this venture. CONS 1. based on the initial findings of this feasibility study, this opportunity appears to be a longterm prospect that will require patient capital. A for-profit structure would probably face significant challenges and frustrations. Co-operative Co-operative ownerships models ( Co-ops ) can include Ag Producers, consumers, or both. Co-ops has been used in some tribal communities to support Native ranchers. PROS 1. aligns the goals of all members/owners to achieve the desired benefits for all members (e.g., expand markets, improve access, or both), and 2. it allows individuals and small-scale Ag Producers to combine their resources to expand their scope and scale that is required to serve a local foods markets. CONS 1. inherently difficult to manage due to shared ownership and Federal co-op law requirements

49 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA 47 Recommendation Based on the findings of this Feasibility Study, we recommend that CNO strongly consider using a Non-Profit Structure as the primary entity that operates the food hub. This will set expectations among Tribal stakeholders that this operation is intended to provide a social impact within the CNO Territory while also pursuing financial sustainability. And the non-profit structure will be appropriate for most grant programs in terms of eligibility.

50 Risk Mitigation Strategies Risk Mitigation Strategies START WITH MULTI-FARM CSA BUSINESS MODEL ONLY: This business model appears to be the best fit for the current local food system. The primary benefits of this approach include: 1. The food hub gets paid in advance which provides cash flow to fund operations 2. It does not require Ag Producers with GAP certification 3. It provides a direct connection between local Ag Producers and Individual Consumers 4. Ag Producers are often paid a higher price as compared to wholesale pricing 5. It fits the relatively small scale of local Ag Producers START WHOLESALE WITH FRIENDLY CUSTOMERS : CNO owns and operates several food outlets across the CNO Territory including restaurants at the casinos, employee cafeterias, and the Clayton Store, among others. If CNO is able to build a supportive team approach among these food outlets it will allow the food hub to get started on serving larger, wholesale accounts with a more forgiving customer base. REQUIRED GAP-CERTIFIED PRIOR TO WHOLESALE: CNO should require Ag Producers to secure GAP Food Safety Certification before beginning to serve non-tribal wholesale accounts. This will provide credibility for the food hub while minimizing risk. This should be done in partnership with existing Food Safety Training resources, such as OSU Extension. In general, a new food hub operation to try to focus on core activities of aggregation and sales until it become financially self-sustaining. Trying to offer farmer training will strain limited resources. OUTSIDE EMERGENCY SUPPLIER AGREEMENTS: One of the challenges faced by new food hubs is having a reliable and diverse supply available for customers on a year-round basis. If the region faces a negative weather event, it could severely limit the local crop availability and turn off new customers. The food hub should pre-arrange agreements with Ag Producers or Distributors outside of the region to avoid this potential risk. SEASON EXTENSION: High tunnels have been proven to offer some risk mitigation for crop production in challenging climates. They offer several advantages including protection from heavy rains and hail, ability to control the amount of water through drip irrigation, and some control over temperatures which allows Ag Producers to start the season approximately 30 days ahead of the normal planting season. Overall, high tunnels improve quality and increase production yields for farmers which reduces risk. PROVIDE QUALITY FARMLAND AND INFRASTRUCTURE: CNO owns +/-30,000 acres of quality ranchlands near the Red River. This is the best agricultural land in the CNO Territory. The Tribe could consider developing blocks of land that could be leased (at a discount) to experienced fresh produce farmers that are willing to sell their products to a CNO Food Hub. Providing on-site cooling, irrigation, and equipment would be very beneficial and could significantly increase the ag production in the CNO Territory if land becomes a major constraint to local production.

51 Appendices Appendices Farmers Market Recommendations Durant Farmers Market KEY ISSUES AND CHALLENGES 1. This market is strong overall, growing in a positive way. However, they need more product diversity, particularly in terms of prepared foods, baked goods, and ready to eat meals. 2. There s are a relatively good balance between the supply of products and the demand for them. That said, there appears to be room for significant growth in the customer base, and therefore the demand for products. This would enable an expansion in either vendor numbers or product mix and amounts. 3. Uncertainty about food sampling laws and requirements is preventing even the most basic product sampling. Sampling can increase demand significantly, especially for newer or unusual items. 4. There have been no surveys taken of customers, so the precise needs and wants are not known. STRENGTHS TO BUILD ON 1. A strong market, in a good downtown location, with a modest but growing customer and vendor base. The market seems to have a good reputation in the community, and among vendors. 2. Led by the Durant Main Street program, the market has relatively good community outreach and promotions, including the weekly market basket give-away and regular social media 3. There is a strong, close relationship between the market and the Main Street program; appears to be a good relationship with downtown businesses overall. RECOMMENDATIONS 1. Conduct at least two Rapid Market Assessments in 2018 to better assess customer numbers, wants, needs, likes and dislikes. SCALE can provide an easy-to-use template for the RMA, if wanted. 2. Continue to grow the vendor base, focused primarily on filling current product gaps, such as prepared foods, baked goods and ready to eat meals. Once the RMAs have been completed, additional product gaps may be identified.

52 50 Appendices 3. Launch a sampling program within the rather strict guidelines of the Oklahoma Department of Agriculture. We d recommend that this being with: a. Baked goods and ready to eat foods, prepared in a certified kitchen b. Whole produce that does not need to be cut or processed in any way. The obvious items here would be berries, cherry tomatoes (especially the various colors and varieties), grape tomatoes and washed carrots. The market could support a sampling program by promoting it on social media 4. Increase the customer base through: a. Identifying and reaching out to health, wellness and food/cooking groups in Durant and the surrounding areas. A short, minute presentation with pictures from the market could be developed and used with a range of these and other civic groups. b. Plan and organize special events for market days, particularly cooking or food demonstrations with chefs from downtown restaurants, the CNO Casino, etc c. Investigate adding and EBT system, with tokens for wide vendor use Farmers Market Recommendations McAlester Farmers Market KEY ISSUES AND CHALLENGES 1. Market leadership is lacking, with a widespread perception that the board is not adequately representing vendors, nor including them in important decisions. There is insufficient communication between the board and vendors, and no clear means for vendors to express ideas or concerns with the board. 2. The market by-laws are outdated and do not specify how board members are chosen, the length of terms and other basic rules 3. More vendors are needed along with more product diversity. Currently there is too much overlap of products among a small body of vendors. The base of 3 6 vendors on average each market day is too small to attract and build a strong, diverse customer base 4. The customer base is weak for a town of McAlester s size, with an estimated average of customers per market day. This should and could be customers daily, given the population. More younger families and millennials are also needed within the customer base. 5. The market location, while close to the downtown, is visually unappealing STRENGTHS TO BUILD ON 1. Product quality is generally good and produce is usually washed or cleaned. 2. Presentations of product are improving and booths are looking better. 3. One younger vendor is ready to assume market leadership and would likely make a strong manager and market promoter, a role he is investing his time preparing for.

53 FOOD HUB FEASIBILITY STUDY: SOUTHEASTERN OKLAHOMA 51 RECOMMENDATIONS 1. Alter the market s by-laws and board processes to ensure that: a. All board members are elected, by the vendor base. b. Staggered terms of 2 and 3 years should be used to avoid massive shifts in the board composition in the future. These might be renewable once or at most twice, but no board member should be a member for life. c. If at all possible, hold the first board election in 2018 d. Require regular meetings of the board either quarterly or bi-monthly (every other month) and ensure that all board meetings are advertised and open to all vendors e. Consider adding a customer representative to the board 2. Hire a market manager, with support from CNO, focused on: a. Promoting and building the market to customers, potential customers, chefs and downtown merchants b. Increasing the number of vendors and the overall product diversity c. Helping farmers coordinate and plan, such that they increase the product diversity at market each week and reduce the redundancy of products overall (some overlap is reasonable and necessary) d. Cultivate good communication among the vendors and between the vendors and the board e. Work with the board and members to improve the physical appeal of the market itself 3. Increase the customer base through: a. Develop a customer base during 2018, and use that to increase the regularity of shopping, to promote seasonal specials, and to encourage customers to reach out to friends and neighbors b. Hold a Market Grand Opening, as well as seasonal events, to bring in new customers. Be sure that there are several vendors and ample product diversity when these events are held c. Expand and strengthen the social media presence of the market d. Reach out to health, wellness, food and cooking groups in the community, using a minute presentation about the market, available products, etc e. Conduct at least two Rapid Market Assessments in 2018 to better assess customer numbers, wants, needs, likes and dislikes. SCALE can provide an easy-to-use template for the RMA, if wanted. Once the RMAs have been completed, additional product gaps may be identified. f. Launch a sampling program within the rather strict guidelines of the Oklahoma Department of Agriculture. We d recommend that this being with: i. Baked goods and ready to eat foods, prepared in a certified kitchen ii. Whole produce that does not need to be cut or processed in any way. The obvious items here would be berries, cherry tomatoes (especially the various colors and varieties), grape tomatoes and washed carrots. The market could support a sampling program by promoting it on social media

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56 Economic Development Associates, LLC Anthony Flaccavento John Hendrix