| | Introduction | Distribution models & key markets for local food | Definitions | Market outlets | Who is listed? | References
.
Introduction
The distribution of local foods has taken on many forms, as producers, logistics companies and buyers find creative ways of getting local food into the community. The approach that a business takes is influenced by many factors, such as wanting to incorporate certain values, wanting to fill a particular market need, the geographic location of the business, and other factors. As a result the business model is always unique to each individual business.
Distribution Models & Key Markets for Local Food
The matrices below portray common business models in the distribution of food and the markets in which they serve. The purpose is to generate ideas for other businesses, providing basic models that can be adapted to suit other situations and therefore expand the distribution of local foods.
In the tables that follow, the left column displays the various models. This list is not comprehensive, as there may be hybrids that combine characteristics of more than one model. The top row displays the various markets. Further explanation follows below:
Distribution Models (left column)
- Business models and their main role in the distribution of local food (i.e., Producer, Distributor, Aggregator, Consolidator).
- Some of these businesses may have a combination of roles (i.e., Producer/Aggregator).
- Distribution is a component of each of these models; while some will deliver product on their own, others may contract the delivery portion out to a third party.
- Businesses within each model could vary in size, from small-to-large, or they may vary in the complexity of how they do business (few-to-several stakeholders).
Market Outlets (top row)
- Various market outlets (i.e., Direct-to-Consumer, Specialty Retail, Food Service, etc.)
- Businesses may sell their products into a number of market outlets. They are listed in the matrix where they sell at least 10% or more of their products into that market.
Each of the businesses listed in the tables are linked to a business profile, providing a background on their business structure, details of their operation, the markets they serve, a link to their website, and more. (Please click on business names).
.
Key: Business Profiles
AB - Alberta examples
US - USA examples |
Definitions
.
, DISTRIBUTION MODELS
(Key Role) | .
BUSINESS
PROFILES | MARKET OUTLETS |
Direct-to-Consumer Home delivery, farm retail, CSAs, farmers' markets | Retail
Specialty stores, ethnic, organic, etc.
| Food Service
Restaurants | Food Service
Institutions | Retail
Regional or national chains |
| Producer Model | TK Ranch Natural Meats
(AB) (56KB PDF) | √ | √ |  | | |
| Distributor Model | | | | | | |
| Aggregator Model | Cherry Capital Foods (US)
(27KB)
| | √ | | √ | |
Innisfail Growers (AB)
(53KB PDF) | √ | | | | |
| Consolidator Model* | Sunfresh Farms Ltd. (AB)
(56KB PDF) | | | | √ | √ |
* The Consolidator Model focuses on moving large volumes of product, whereas the other three models focus mainly on distributing local food.
Alberta Business Profiles - will be posted upon availability
Distribution-plus
Food Hubs offer more than food distribution and are a combination of services. The goal of their business model is to provide locally/regionally produced food while maintaining strong networks or relationships with the producer and often the broader community, through the other services they provide.
, DISTRIBUTION MODELS
(Key Role) | .
BUSINESS
PROFILES | MARKET OUTLETS |
Direct-to-Consumer Home delivery, farm retail, CSAs, farmers' markets | Retail
Specialty stores, ethnic, organic, etc.
| Food Service
Restaurants | Food Service
Institutions | Retail
Regional or national chains |
| Food Hub | Appalachian Harvest Network (US) (358KB PDF) | | √ | | √ | √ |
| The Local Food Hub (US) (490KB PDF) | | √ | √ | √ | √ |
Additional option for businesses
- Brokers assist businesses (producers, aggregators, others) by increasing their marketing connections.
- A broker-plus role may provide additional services, such as logistical arrangements to get product to the buyer.
, DISTRIBUTION MODELS
(Key Role) | .
BUSINESS
PROFILES | MARKET OUTLETS |
Direct-to-Consumer Home delivery, farm retail, CSAs, farmers' markets | Retail
Specialty stores, ethnic, organic, etc.
| Food Service
Restaurants | Food Service
Institutions | Retail
Regional or national chains |
Broker or
Broker-Plus | Red Tomato (US) (34KB) | | √ | √ | √ | |
Definitions
Producer Model – Producer(s) are the key drivers or coordinators to get their product to the market. They may play different roles. For example:
- Producer/Distributor - delivering their own products and products of other producers. They may have their own trucks on the road or coordinate with a carrier.
- Producer/ Retailer – producers that have their own retail store
Distributor Model – In this model, the distributor’s main focus is local food. They do not produce the product, but are part of the supply chain, getting the product to the market or to the end user. They are the key driver in this particular model. They often have ownership of the product at some stage, although this would depend on the business arrangement with the producers. They may also assist in coordinating product delivery to specific drop off points or depots. The distributor then picks up the product and delivers to the end market. They may take on additional roles, such as a broker that helps producers find new markets.
Aggregator Model – Local food is the focus of the aggregator. They gather or bring together products to create a larger mass at a distribution centre or common drop off point. Products that are pooled at this site may be sorted, graded, washed, and packaged, or co-packaged. They may also include light processing, such as peeling or slicing, prior to packaging. Product is often temporarily stored before it is delivered, as part of the business operation. The aggregator’s distribution centre may be producer-owned or owned by a third party.
Consolidator Model – The main business of these consolidators is not local food specifically (although they are distributing local food), but rather creating a large volume of product, usually without recognition of the source. Product may be consolidated under a new brand name. These are larger centres serving the current food distribution system in retail and food service, focused on efficient delivery, with transport trucks handling large volumes and travelling great. Producers are generally not directly involved, although they may sell into the retail system. Consolidators handle a broad range of products (e.g., dry good, produce, meats). They may be national chains or smaller regional chains.
Food Hub – Food hubs offer more than food distribution (i.e., Distribution-Plus). A food hub is a business facility with capabilities for aggregation, storage, processing, logistical coordination, distribution, and marketing services for locally/regionally produced food products. At the same time, their focus is to maintain strong networks or relationships with the producer &/or the broader community through additional services. These could include one or more of the following: producer training, consumer education, regional labeling, wholesale or retail vending space, etc.
Food hubs include the most complex business arrangements. Due to the diversity of services offered, food hubs can vary greatly from one to another. (See USDA Working Definition of a Regional Food Hub below.)
,
Working Definition of a Regional Food Hub:
“A centrally located facility with a business management structure facilitating the aggregation, storage, processing, distribution, and/or marketing of locally/regionally produced food products.”
“Core Components of Food Hub
1) Aggregation/Distribution-Wholesale
- Drop off point for multiple farmers and a pick up point for distribution firms and customers that want to buy source-verified local and regional food
2) Active Coordination
- Hub business management team that actively coordinates supply chain logistics, including seeking market for producers and coordinating efforts with distributors, processors, and buyers.
3) Permanent Facilities
- Provide the space and equipment for food to be stored, lightly processed, packed, palletized and possibly even sold under a Hub’s regional label
.
Other Possible Services: Provide wholesale and retail vending space, offer space for health and social service programs, community kitchens, community meetings, etc.”
Source: USDA AMS. (2010, May 20). Regional Food Hubs: Linking producers to new markets. Retrieved July 22, 2011
|
Brokers – Brokers are hired to play an important role in the market, and act as a conduit rather than being an example of a distribution model.
- They may be an option for producers, aggregators, etc. to assist them in getting their product to market.
- They represent products only. They do not own product and may or may not own vehicles. They usually do not deliver product.
- Some businesses may play a Broker-Plus role, and include additional services.
Other options
Businesses may decide to contract out parts of the business operations, such as contracting with a carrier to deliver their product. They might also take advantage of a truck that is returning from their destination point, going back to their origin, in order to deliver product (backhaul).
Market Outlets
Direct-to-Consumer (D2C) - This is the shortest link between the supplier and the buyer. Delivery methods may include: delivery to doorstep (homes or businesses), delivery to a depot for pickup by the consumer, Community Supported Agriculture (CSAs), on-farm retail, farmers' market, etc.
Food Service – This is defined as “food served away from home.” It includes independent restaurants, locally owned chain restaurants (not large chains), independent coffee shops, institutions (colleges, schools, health care facilities, cafeterias, and hospitals), hotels, correctional facilities, truck stops, delis, catering, bed and breakfast, and others (arenas, fairs, community functions).
- Restaurants – (local, independent, or smaller chain restaurants)
- Institutions – (smaller scale institutions) Include healthcare centres, colleges or universities. May involve direct purchasing with producers, or purchasing through a third party.
Retail
- Specialty Retail – These are retail stores that carry a specialty line of products such as ethnic, organic and natural products (e.g., Italian Centre Shop, Community Natural Foods, Planet Organic, Sunterra Market etc.)
- Retail – These are smaller regional chains or large national chains, membership type stores or box-stores (e.g., Co-op, Save-On, Sobeys, Safeway, Walmart, Costco, etc.).
Who is Listed?
A number of businesses were chosen as examples to represent the various categories.
They were placed within a category based on their key business structure and the main markets they serve. Within each segment there may be a variety of business sizes, from a relatively simple to a complex business model.
The businesses listed may represent one of the following:
- Participants from the pilot study, “Distribution of Local Food: Best Practices. A pilot project in Alberta’s Central Region.”
- Other examples from Alberta
- Models from other parts of Canada
- Models from other countries
The examples provided are not all inclusive of Alberta or of Alberta’s Central Region, as there are many others that exist. All the examples used, whether from Alberta or other locations, will portray at least in part the different categories. A business may serve various markets, and therefore could be listed in more than one category if they have at least 10% or more of their product in that market (e.g., food service and direct-to-consumer). It is a snapshot in time. These businesses may change in position on the chart if they expand, or change their structure.
References:
Reynolds, B., & Gowriluk, E. (2011/12). Research on food enterprise business profiles. Alberta Agriculture and Rural Development.
USDA AMS. (2010, May 20). Regional Food Hubs: Linking producers to new markets. Retrieved July 22, 2011. |
|