| July 7, 2011 Visit to the Charlottesville Local Food Hub Report by Lucie Snodgrass, Regional Food Systems Working Group OVERVIEW The combined West Virginia/Maryland group spent four hours at the Local Food Hub in Charlottesville, Virginia on July 7. The group met with founder and Executive Director Kate Collier, who gave a detailed presentation and answered questions about every facet of the 3800 sq. ft. hub, which began operation in 2009. Preplanning for the hub included writing a comprehensive business plan, which was also used to raise the startup capital. The business plan addressed budget, staff and transportation needs, as well as looked at demand and how to reliably ensure enough diverse supply to meet it, if not year round, then for most of the year. The hub occupies donated, refrigerated space with a loading dock in a warehouse complex just outside of Charlottesville. It is structured as a non-profit service organization and is governed by a six-member Board of Directors. The hub was started to strengthen and preserve a diverse, healthy regional food supply in central Virginia. Among the foods that it offers for sale to customers are a wide variety of fruits and vegetables, chicken, beef, honey and eggs. It works with over fifty local farmers and makes 100 deliveries a week to dozens of clients, Monday through Friday, within a 40-mile radius of the hub. The hub is also open from 8:00 a.m. to 4:00 p.m. for deliveries, but is closed on Saturdays and Sundays. All orders for Monday have to be placed by the Friday before, and customers must order a minimum of $100 or they will be charged a $10 delivery fee. The hub carries a $3 million umbrella liability policy, which covers its farmers. They do not require their farmers to be GAP-certified, and they do not have specific, mandated growing practices. In their two years of operation, they have not had a single health-related issue or claim. The hub and the farmers agree on a set price per pound for their products, and the farmers are issued checks on a biweekly basis. Prices are usually set at the beginning of the growing season and reflect what wholesale markets are paying and what the farmers feel they should be paid for their produce. Prices are rarely adjusted in the course of the season. The hub sells the farmers half-bushel boxes, which they are required to use for packing their products. There is a paid staff of four, including an Executive Director, Warehouse Manager, Development Director and a fulltime driver. The LFH also runs a 75-acre educational organic farm called Maple Hill, which was donated by musician Dave Matthews, in Scottsville, Virginia. Six acres of the farm are used to cultivate produce that is sold through the hub, while the rest of the land and its facilities are used for educational programs and farmer training. There is a 3,000 sq. ft greenhouse for farmers to grow plants from seed. The farm has two full-time farm managers and a number of part-time and seasonal help, for a combined FTE of eight at both locations. The hub also relies heavily on volunteers. The combined budget of both locations is $580,000, of which $75,000 reflects earned income, while the remainder is raised through a variety of sources, including local and federal government grants and foundations. The hub purchased over $310,000 of local produce in 2010 and they are on track to buy even more in 2011. The financial sustainability of the hub is clearly one of its main challenges, which is why a full-time development/communications person and a part time grant writer are essential staff members. The hub has received numerous grants, including one for an organizational assessment and one to buy local meat for the Virginia Farm to School Program. The hub has worked with a consultant to gauge what customers wanted, develop a demand list and then work with farmers to get them to grow those products on their farms. The hub, the customers and the farmers all try to work together to ensure that farmers are growing what the customers want in adequate quantities and under safe and sanitary conditions, while also ensuring a fair price for the farmers. Generally, the food hub marks up purchased food by 25 percent and puts those profits back into running the hub. Coordination among the groups also ensures that farmers are not competing against each other with the same crops if demand is not sufficient, and that there is enough diversity of offerings at slightly different times, so that local tomatoes, for example, enjoy as long a season as possible. Each year, the hub and the farmers work to complete production planning by January 15. The hub has very little waste - less than 1 percent - as food that is not sold is donated to local food pantries. About 5 percent of the hub’s food is given away. They were also successful in getting a grant to supply produce to local Boys and Girls Clubs, and they continue to look for more customers and avenues for their farmers’ products. The hub is not particularly high tech or sophisticated, nor is it fancy. It is a basic warehouse space with a loading dock, limited office space, a large cold storage room, a bathroom and a small kitchen area. The staff work in Quick Books and Excel and have basic office necessities like a computer and printer. In addition, they lease a 16-foot truck and own another smaller truck, and they are planning to buy a 16-foot refrigerated truck if and when they receive a grant for the purchase. In part to move the hub towards financial sustainability, Collier indicated that they would like to increase and diversify the offerings they have by processing and flash freezing fruits and vegetables like corn, tomatoes and peaches. However, the cost of a flash freezer is $150,000, and processing facilities are also expensive. The hub is looking at grant opportunities that might make those affordable and thus give it more revenue sources year round and expand their farmers’ earnings and outlets. One of the most important components of the food hub’s success lies in its relationships – both with farmers and with buyers. It is the personal attention and follow-up of staff, from the Executive Director to the Sales staff, that builds trust among farmers and especially among the buyers, who are looking for reliability, affordability and the direct connection to local agriculture. While the staff does use emails to update the price and availability on a daily basis, the hub’s director said that virtually all of their sales were made over the phone. MISSION The Local Food Hub is “a non-profit service organization that was founded in 2009 to strengthen and preserve the future of a healthy regional food supply in Central Virginia.” In so doing, it provides “local farmers and producers with concrete services and infrastructure necessary to advance their economic vitality, and to promote stewardship of the land.” The hub defines “local” as within a 100-mile radius, although their delivery radius is 40 miles. SERVICES The hub works directly with more than 50 local farmers to meet the market demand for locally grown and produced foods, including for hospitals, local restaurants and other central Virginia institutions, including UVA and local school systems. Because competitive pricing is inevitably an issue for customers, the hub works to keep prices as low as possible while still paying farmers a fair wage. One of the ways in which they do that is by buying in large numbers from some growers, allowing them to make up in volume sales what they are not selling at top dollar. The hub also provides transportation, cold storage and marketing services to farmers. The farmers are paid an agreed upon price per pound for their crop; that price is generally set at the beginning of the growing season with data from several sources, including wholesale auctions, and usually does not vary greatly. The farmer sells his or her product to the hub for less than what they could receive if they direct-marketed it themselves; however, the farmer can concentrate on doing what he or she does best, and that is growing food. In return, the farmer has a regular, paid outlet for some or all of his crops. Typically, the hub will mark up goods for sale by 25 percent, using the profit to defray the costs of running the farm and the hub. In some instances, the hub will accept goods from farmers on a consignment basis. The hub agrees to store the farmer’s food and if it sells, the hub will take a cut of the profits. If the produce doesn’t sell, the hub donates it to a local food bank, ensuring that no food is lost due to spoilage. BUDGET The total budget for the LFH and the farm is $580,000, which reflects the donated space at both the hub and the farm. To run just the hub, it would cost $230-250,000, the Executive Director estimates. Last year’s earned income was $75,000, with the remaining $500,000 having been raised from various sources, including local and federal government and private foundations. Ideally, the hub should be capitalized for three years, but they have not been able to achieve that financial cushion. Money for the refrigerators and the pallet racks was obtained through grants. PRICING AND PURCHASING OF GOODS The hub buys a variety of produce and other locally raised or produced products, based in large part on what the larger purchasers want, which the hub determines through talking with them to determine their needs. They work with the farmers to help set the prices, they do research about what the wholesale markets pay and sell produce for, and they do pay some farmers differently, based on volume sales. If a pound of tomatoes is bought for $1 a pound, for example, the hub will sell it for $1.25. They average buying from between 27-31 farmers per week; five of those are the hub’s primary growers.
WORKING WITH THE FARMERS The hub works with over fifty farmers who provide a wide variety of local foods for as much as the growing year as possible, with local chicken and beef available year round. The farmers are paid an agreed upon price for their crops, which is based on input from wholesale markets and from the farmers themselves. Some farmers who sell in large volume to the hub are paid slightly less per pound but make it up in volume of sales. The farmers and the hub sign a letter of agreement that states, among other things, that the food is grown by the farmer and that they will consent to have their story featured as part of the hub’s marketing effort. As part of that, the farmer has to fill out some demographic information. In return, the hub helps to tell the farmers’ stories to the buyers. The name of the farm from which the produce comes is on every box, which the farmers insisted upon. Farmers report that their sales volume has increased about 10 percent through their relationship with the hub. Farmers are for the most part growing produce that they know the hub needs and which the buyers have said they wanted. The hub hired a consultant, Anthony Flaccavento of Appalachian Sustainable Development (ASD) to work with farmers to make sure they were growing what the customers said they wanted, how they wanted it grown, and in staggered increments to extend the availability of certain crops for as long as possible. From the work with the consultant, the hub developed their demand list for standing orders. This was a crucial change, because when the hub first opened, they were buying produce that it turns out customers didn’t want to pay a premium for, like lettuce. The hub doesn’t have explicit growing standards, nor does it require the farmers to be GAP-certified, although the hub itself is and it carries a $3 million liability insurance policy that also covers its farmers. The hub sells the farmers half-bushel boxes in which they are supposed to pack the produce; they don’t, however, sell them labels. There was some discussion, sparked by a question from Joan Norman, about the fact that the farmers were still not doing a good job packing the produce in the boxes. It’s clear that some additional farmer education needs to take place. In terms of transporting the goods, initially the farmers wanted the hub to pick up all their product; however, the hub found that the farmers’ products weren’t ready when they went to the farm at the agreed upon pick up time. Now, the hub picks up at an agreed upon time and location that is convenient to both entities. The farmers are paid biweekly, a total of fourteen times during the year. WORKING WITH THE CLIENTS Every week, the hub emails an availability and price list to all of its customers. The sales director also speaks individually with all of the hub’s customers, and virtually all of the buying is done over the phone. The Executive Director stressed that maintaining the strong service and personal relationships between the hub and the buyers is one of the most important functions of the hub staff. Large distributors and bulk buyers don’t usually have the time to build the relationships directly with the farmer, though they want the benefits of those relationships, and the hub is their conduit to the farmers. The hub delivers Monday through Friday, making around 100 deliveries a week within a 40-mile radius. Customers must place their orders the day before delivery, and they must place a minimum order of $100 or pay a $10 delivery fee. INSURANCE While some individual farmers carry their own liability insurance, the hub carries a $3 million liability policy that covers all of the vendors they use. It costs $1900 per year, and the hub has never had a food safety issue. They do not require their growers to adhere to a particular protocol, nor do they require them to be GAP certified, although the hub itself is. The total cost of all of the hub’s insurance policies, including for their trucks, is $20,000 a year. TRANSPORTATION The hub leases one 16-foot truck and owns another. They are hoping to buy an additional 16-foot truck that is refrigerated. KEY TAKE-AWAYS AND LESSONS LEARNED
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