What is in this article?:
- Local foods reaching consumers through diverse chain
- Small size need not hinder success
- Food miles, fuel use, and economic impacts
- 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.
Small size need not hinder success
Although local food supply chains vary greatly in size, they typically accounted for a fraction of total demand in a particular product category in each location. Supply chains for beef in Minneapolis-St. Paul illustrate the potential size differences between mainstream, intermediated, and direct-market supply chains.
The total volume of beef the mainstream supply chain sold to a handful of the supermarket chain’s retail locations was greater than the entire production volume for the local intermediated beef supplier, which, in turn, distributed about 30 times more product than the local direct market producer.
Although supply chains may be different sizes, small farms and enterprises in local food supply chains can be successful if they are able to make investments in processing and distribution infrastructure, or if there are nearby facilities to supply those services. Many enterprises in local food supply chains develop their own capacity for processing and distribution. For example, a farm that supplies a New York school district with apples in an intermediated supply chain invested in its own washing, sizing, and packing equipment. Similarly, the home-delivery dairy in the Washington, DC, area has an onfarm milk processing and bottling facility and owns a fleet of delivery trucks.
Other producers in local supply chains rely on processing or distribution facilities that also serve mainstream supply chains or foster close relationships with businesses that provide specialized services. The direct market apple producer in Syracuse sells most of its product to a packing-shipping operation that distributes to mainstream supermarkets, but some of the crop later sold at farmers’ markets is stored at a nearby controlled-atmosphere storage business.
Regardless of size or type, a key characteristic of the supply chains in the case studies was the presence of durable relationships among supply chain partners. Both mainstream and local supply chains fostered relationships based on trust, frequent personal communication, and information sharing. In mainstream supply chains, where competition on price and low-cost production, processing, and distribution systems are the norm, durable relationships help maintain a consistent flow of product in large and complex supply chains. For local supply chains, relationships with processors or retailers can give smaller producers a toehold in larger markets, or can reduce uncertainty by building mutual interdependence between partners.
Supply chain structure and information conveyed to consumers
The amount of information conveyed to consumers appears to be closely related to the structure of the supply chain. The information that consumers receive about where, how, and by whom their food was produced ranges from little or none in mainstream chains, to detailed information in some direct marketing supply chains.
Direct market supply chains for local foods typically provide the most information to consumers about product origins. With no intermediaries between producers and consumers, it is relatively easy for farmers to inform customers about how and where food was produced. These farmers are often the “face” of their company, and consumers may derive benefits from knowing who produced their food.
With the addition of supply chain intermediaries, it becomes more difficult and costly to convey information to consumers. Information about production practices and geographic origin is common in intermediated local food supply chains, but it is unusual for individual producers to be identified. For example, local spring mix sold in a consumer cooperative in Davis, CA, is marketed as “local/California,” but no specific grower is identified. Although the co-op is committed to sourcing spring mix from local growers, irregularities in supply and the need to be flexible in its sources of product make it costly for the co-op to display more specific information.
Product characteristics and production practices that generate retail price premiums may determine supply chain structure and the information conveyed to consumers. Consumers may be willing to pay for some characteristics that require knowledge of where and by whom the product was produced. Farms that use unique production practices, such as pesticide-free or grass-fed production, may wish to maintain their identity in the supply chain to convey this information to customers and to capture price premiums.
In other cases, observation of characteristics or production practices may not require information about individual farms. Labels convey information about certain production practices that can generate price premiums (for example, organic production or animal welfare practices); conveying detailed information about a specific producer may not yield a large enough price premium to justify additional costs.
The relative costs and benefits of conveying information to consumers may explain why some locally produced foods are not identified as such, or why some local supply chains do not identify individual producers. For example, much of the milk sold in the mainstream supply chain in the Washington, DC, area is produced and processed locally. Highlighting this fact involves a cost for the cooperative that processes and distributes milk, and this information may be of little value to consumers buying privately labeled milk in supermarkets.