Wednesday, December 21, 2011

USDA - Marketing local foods through value-adding channels gets largest market share

The information quoted below comes from a recently released U.S. Department of Agriculture report analyzing sales channels for local foods (links below). I posted about it earlier.

Here is a market for local food measured at $4.8 billion per year (several years ago) and is continuing to advance rapidly. Demand significantly exceeds supply.

Right now, we need more local foods infrastructure and fewer conferences about what to do about local food.

This is a big opportunity to create jobs and economic development. Experiments like the ones we're running at the Wisconsin Innovation Kitchen can be used to build sustainable business models for local foods across urban and rural areas.

In the report below, the Innovation Kitchen would be considered an 'intermediated channel' - that is, (my non-academic definition) steps between the grower and the consumer that add value.

From the report summary:

"What Did the Study Find?

• Marketing of local foods, via both direct-to-consumer and intermediated channels, grossed $4.8 billion in 2008—about four times higher than estimates based solely on direct-to-consumer sales.

• Farms marketing food commodities exclusively through intermediated channels reported $2.7 billion in local food sales in 2008—over three times higher than the value of local foods marketed exclusively through direct-to-consumer channels, and two times higher than the value of local foods marketed by farms using a combination of direct-to-consumer and intermediated channels."

"Most local food sales by large farms were marketed by those exclusively using intermediated channels."

In doing so, these farms were able to reduce labor expenses per dollar of sales by leaving the labor-intensive distribution of local foods up to intermediaries." (Medium farm and large farms were measured as $50,000 in gross sales per year or above)


The Wisconsin Innovation Kitchen is an 'intermediary channel' for our local growers. I like the term 'value-adding channel' better.

What the report doesn't say, is that these value-adding channels can not only supply labor-intensive distribution services, but they can contribute to the even more fundamental, and critical role of marketing and sales.

I love farmers markets and direct-to-consumer outlets for local foods. But I also see a lot of great new opportunities for farms, food entrepreneurs, and consumers to work through value-adding facilities, like the Wisconsin Innovation Kitchen.

In this report from 2008, a small percent of farms captured more than half the total sales of local foods according to this study. They did it by marketing through more profitable value-adding channels. We watched this happen all year long at the Innovation Kitchen.

Value-adding facilities make local foods increasingly available to ever larger numbers of people at increasingly valuable price points for all involved.

When you can build local food value-adding facilities around business models that include support for community-based goals, like the Wisconsin Innovation Kitchen, you can move forward in many directions at the same time.

USDA original Document. Direct and Intermediated Marketing of Local Foods in the United States. 3.7 MB in PDF format.

USDA Report summary. PDF format. 2 pages.

Original post about this USDA doc.

Photo is from the Wisconsin Innovation Kitchen, our value-adding food processing facility, owned by the Hodan Center, supporting people with disabilities.

Iowa County Area Economic Development. Come Grow With Us,

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