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Gaps in Produce Supply Chain Offer Local Food Opportunities

As fresh markets grow, distributors and retailers scramble to keep up

February 20, 2012 | By Patty Cantrell
and Bob Heuer
Great Lakes Bulletin News Service

Photo credit: Gary Howe
  Demand for fresh and local produce is pulling more farms and their products into larger wholesale distribution channels.

Joe Pirrone knows what’s driving growth for his packing and shipping business.

Mike Pirrone Produce—named after Joe’s father, who started the business— is expanding its southeast Michigan plant to capitalize on what Pirrone says is “tremendous opportunity” in the market for fresh and local food. His company distributes vegetables like tomatoes, cucumbers, and peppers from 55 nearby farms, including Pirrone’s own 1,300-acre operation.

“We have 1,500 bushels on a semi going to one distribution center that will service 150 stores,” he explains. “To truck that in from California, it’s $7,000. From here to our customer in Ohio, it’s $900.”

In addition to the advantage of “freight and freshness,” Michigan growers have gained a marketing edge with retail chains that now promote their products as “local.”

Those retailers have always sold Michigan produce when the harvest moved from southern to northern states, but until recently they simply were not touting that fact to shoppers.

But that change in marketing is not a gimmick in Mr. Pirrone’s mind. “We are the local product,” he says.

Now, as retailers purchase more produce from established local suppliers, those growers and packers are adding capacity to fulfill growing demand. Meanwhile, America’s ever-adaptive produce delivery system is starting to notice, as it comes to grips with a local food movement that may have more traction than meets the eye.

Building New Supply Chains
In fact, demand for direct-market, farmers-market type product is already spilling over into higher volume wholesale channels. Those wholesalers are responding not only with advertising touting their products as “local,” but also with attempts to shorten the distance between the farm gate and dinner plate and provide more information about where the food comes from and who produced it.

That is because consumers want evidence that their purchases are benefitting the local economy, increasing regional food security, and improving public health.

Shorter supply chains are still in the formative stage. But they could spur opportunity for growers who have survived market consolidation by expanding their operations, as well as for newcomers starting in direct markets and expanding to wholesale.

That would be a welcome change, especially for retailers. Many of them find that the time and expense of cobbling together supply from a larger number of small farmers can be exasperating.  In fact, Michigan Grocers Association vice president Mike Hamelin says some retailers quietly hope “local isn’t a trend, but a fad that has peaked.”

But the opposite may be true, says Mike DiBernardo, economic development specialist with the Michigan Department of Agriculture and Rural Development. He contends that the real problem is that supply chain innovations aren’t happening fast enough to satisfy demand for local and specialty products.

“It’s a real challenge,” he says, “to pull together the high quality, reliable supply the market demands. But that also leaves aggregators some opportunities.”

One is the institutional food market.

Hospitals, Schools Helping Out
Earlier this year, 90 Michigan hospitals—half of the hospitals statewide — pledged to obtain 20 percent of their food from local sources by 2020.

Pressure on distributors to supply this demand comes from people like Christa Byrd, food service manager for Lansing, Mich.-based Sparrow Hospital. Its annual food budget exceeds $3 million. 

“We have purchasing power,” she explains. “And we have a responsibility, a mission, to improve health and well-being in the community. Buying local is a way to start working on that, by supporting farmers and our local economy.”

“Part of this local food business is the sustainability of farms,” says Suttons Bay, Mich., grower Jim Bardenhagen, who now sells potatoes to four school districts in northern Michigan.

He started off in 2004 with taste tests at one Traverse City elementary school. Since that time, Michigan has gone from zero to 60 formal farm-to-school procurement programs. Nationally the number has grown to an estimated 2,400 with nearly 10,000 schools involved.

In 2007, for example, the Chicago Public Schools spent $10,000 a year on Midwest produce. This year, it’s up to $1 million in “local” produce, or one-third of the district’s total produce spending, says Jean Saunders, marketing director for Chartwells Thompson Hospitality, which operates the district’s food service.

Much of it comes from Michigan, the next-door state with a great range of fruits and vegetables.  Don Armock, of Sparta, in west Michigan, is one of the suppliers. He runs a fruit farm that’s been in his family since the 1840s. He also operates Riverridge Produce Marketing Inc., a brokerage that supplies more than a third of Michigan’s fresh-market apples to supermarkets, airlines and food service companies.

“Chicago Public Schools are buying our medium-sized fruit,” Mr. Armock says. “We can get apples out of the orchard or out of storage and have them in school cafeterias in one or two days. All those health and freshness benefits accrue to the students.” 

Cesar Davolina, president of Christina Foods, a Chicago-based trucking and warehousing company that serves Chicago schools, sees that the market is clearly changing. So he’s now ramping up a supply network of farmers and farm-related businesses within a 300-mile radius of the city.

“This is a fundamental shift in how Cristina Foods expects to grow,” he says.

Greenstone Farm Credit Services president Dave Armstrong cites numerous ways that small and mid-size producers, as well as larger operations, are seizing opportunities in local and specialty products. The question on his mind and many others is how far local can go.

“Is it enough to dramatically change how agricultural products are grown and marketed? Maybe not yet,” Mr. Armstrong said, “but we’re starting to see gradual changes in that direction.”

This article is part of Turn Up the Volume, a project of the Fair Food Network that reports on innovations and investments connecting Michigan’s local and regional fruit and vegetable growers with wholesale supply chains.

Bob Heuer is a public policy and marketing consultant based in Evanston, Ill.

Patty Cantrell, who produces the series, founded the Michigan Land Use Institute’s Entrepreneurial Agriculture program, known today as Taste the Local Difference, in 2001. Patty now heads her own consultancy, Regional Food Solutions LLC, which works with policy and business leaders to communicate new food and farm business options and public policy directions. A former Fulbright scholar and Food and Society fellow, Patty also sits on the Michigan Food Policy Council. Reach her at pattyATregionalfoodsollutions.com.

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