What is in this article?:
- Case studies of mainstream and local food supply chains reveal the variety of ways that food products move from farms to consumers.
- Farms in local food supply chains maintain a diverse portfolio of products and market outlets, which may help defray large fixed costs across multiple revenue streams.
- Local food supply chains are more likely to provide consumers with detailed information about where and by whom products were produced.
Consumers demanding locally produced food have often had only a few options for buying food produced by nearby farms, including roadside stands, farmers’ markets, and Community Supported Agriculture (CSAs) programs. These market outlets—typically distributing small volumes of specialized products—stand in stark contrast to large supermarkets and other mainstream outlets that distribute the vast majority of food consumed at home in the United States.
As demand has increased, however, local foods are reaching consumers through an expanding array of supply chain arrangements and marketing outlets. Local foods may be sold in supermarkets; in small specialty stores or regional grocery chains; in restaurants, schools, or hospitals; or through a variety of direct-to-consumer outlets (see “Varied Interests Drive Growing Popularity of Local Foods”).
Although many definitions and examples of local food supply chains exist, “local” generally refers to food sourced from nearby farms and producers. Proximity between consumers and producers is an essential component of any local food supply chain, yet the structure of these supply chains can take numerous forms.
ERS-sponsored researchers used case-study methods to provide an indepth picture of how food is produced and distributed in different types of supply chains, and to describe the structure, size, and performance of local food supply chains. Two types of local food supply chains were studied: direct-market (producer-to-consumer) food supply chains and intermediated food supply chains (where one or more “middlemen” handle a locally produced product before it reaches consumers). These supply chains were compared with mainstream food supply chains, where products are supplied through major grocery supply chains that do not attempt to make meaningful connections between consumers and producers.
No “one size fits all” for local foods
How local foods move from farms to consumers often depends on the type of product and geographic location. For example, supply chains for local apples in a major apple-producing State may look very different from beef supply chains in a State better known for grain farms.
With ERS support, researchers studied supply chains for five different products, one each in Syracuse, NY (apples); Portland, OR (blueberries); Sacramento, CA (spring mix leafy greens); Minneapolis-St. Paul, MN (beef); and Washington, DC (fluid milk). For each of these product and location combinations, an example of each type of food supply chain (mainstream, direct-market, and intermediated) was studied in depth.
Consumers likely are most familiar with direct marketing supply chains, such as roadside stands and farmers’ markets. All the case studies of direct marketing supply chains involved farmers who sold locally produced foods at a farmers’ market. However, farmers’ markets are not the only or even most important outlet for direct marketers. Of the direct-market cases studied, none sold their products exclusively at farmers’ markets, three received the majority of their revenue through outlets other than farmers’ markets, and one producer’s primary market outlet is home delivery to customers. Farms that sold through farmers’ markets also used CSAs and buying clubs to sell directly to consumers but also sold products to grocery stores and restaurants. In the case of a New York apple grower who sold at a Syracuse farmers’ market, most of the grower’s harvest is sold to a packer-shipper operation that services mainstream apple supply chains.
Market diversification may be a strategy to defray the costs of large investments related to production and processing. For example, the direct-market farm selling blueberries in Portland, OR, sells at several farmers’ markets, farm stands on hospital campuses, and traditional roadside farm stands. Using multiple outlets may be an option for smaller operations if the cost of accessing additional markets is low and additional revenue is high relative to specializing in a single market.
Other direct marketers may instead use farmers’ markets to expand their customer base. A producer of grass-fed beef in Minnesota sold directly to consumers in Minneapolis-St. Paul, using farmers’ markets as a point of contact for new customers. Established customers are encouraged to purchase products from other outlets, such as a CSA program or buying club, where the producer’s marketing costs and prices are lower and net revenues are higher.
In some intermediated supply chains, where one or more middlemen handle locally produced food before it is sold to consumers, local foods were sold in supermarkets, cooperative grocery stores, or restaurants. These products may be sold alongside products from mainstream supply chains, particularly when retailers make a concerted effort to carry local products when they are available. An upscale supermarket chain in Minneapolis-St. Paul, for example, carries locally produced grass-fed beef, but most beef sold at the supermarket is sourced from a supplier that distributes products across the United States and around the world. Selling a local variety of beef allows the retailer to serve a market niche (for grass-fed beef) while continuing to carry products from mainstream supply chains for the bulk of its customers.