I Guess I’ll just do a little quick intro here I’m Emily Coll, so I’m admin specialist for Local Foods Team. Lynn’s husband is not well today, so I’m stepping in for her We’re recording this video so um you know that’ll help later on Our panelists are Kayla Ko… Kayla, how do I pronounce your last name? Koether Koether. Ok. Kayla Koether and Savanna Lyons and Jason Grimm will not be with us today Also a sick individual I guess. That sounded bad. You know I mean, not healthy and So we’ll start out with these ladies giving the presentation. They’re gonna go through some of the questions that you guys had asked prior To the webinar and then after that they’ll open it up So, I’ll kick it off. This is Savanna, and I… let me share my screen here Give me just one second Okay can everybody see alright? Can you see my screen now? Instead of me? Great! um so I Am a former, a recent graduate of Iowa State University I was part of the Local Foods Team that Iowa State University Extension outreach based out of the Ames and I worked with Craig Chase there on research related to food hubs. I just graduated in I guess a little about a little over a year ago, um and so I spent about three years in Iowa working with food hubs. I helped start up the Food Hub Managers’ Working Group. Which is a group a supportive group of ahhh managers of food hubs all around, Iowa and Kayla is now managing that group, so she’ll tell you more about it umm but I also had the opportunity to travel around the country and visit with about thirteen food hubs of larger scales to interview them about their finances and how they evaluate themselves financially and to take a deep dive into some of their finances I was an interim manager of Farm Table Delivery Which is procurement and delivery. Which is the food hub based out of Harlan, in western Iowa, and so I Helped manage the logistics and the accounting there for a period of time while the owner was on maternity leave And I’m currently managing refresh Appalachia food hubs I’ve relocated to West Virginia, and we’re a little bit different from a typical food hub We do some more types of activities, so I’ll talk about that And I’m here today to give you a little bit of a general overview of what food hubs are, and what they look like, and Kayla is going to give you a little more information about food hubs in Iowa, and then we’re both here to answer all the questions you have. And it looks like from the… From the information we received from Lynn it looks like there’s quite a variety of questions Ranging from how do I start a food hub, to you know what what are the opportunities to buyer for buyers, to kind of like nitty-gritty questions about cash flow and management So, we’re gonna try to answer some of those questions that we received ahead of time, and then just really open it up to you, to let you guide the conversation so So I that’s sort of those are some of the organizations that I won’t work with now they’re on the screen and then Refresh Appalachia food hub is based in Charleston, West Virginia. We, just to give you a little background, we are also a beginning farmer training program, so we train people We provide paid on-the-job training for for beginning farmers to work with our program for two to three years And they’re also enrolled in college they earn an associate’s degree as part of the program earning credits through their on-the-job training And then we created the food hub to create opportunities for the beginning farmers who were training and incubating and also to create opportunities for other farmers in the region’s We’re a non-profit, and we do a lot of different activities That’s the end of my intro um So what’s a food hub? This is USDA’s definition And I’ll just read out loud. “… a business or organization that actively manages the aggregation distribution and marketing…” whoops! Sorry! “…of source identified food products from local and regional producers to strengthen their ability to satisfy wholesale retail and institutional demands” So there’s a whole lot there, and that’s a definition I think some of the important things to take away from that definition: aggregation distribution and marketing are all different types of activities Here’s a diagram of a food value chain which here is shown as a cycle, which is kind of cool because if you… if you’re able to capture waste at the end of the food chain you can actually cycle it back into productions and its really the processors distributors and then to some extent food service and food retail that food hubs get involved in managing so Most of us our aggregation is collecting products together in one place so that might mean providing a drop-off location for products from multiple farms and It might include grading or packing those products and might include providing some kind of food safety assurance and then… Sometimes we do processing, sometimes many of us don’t do any processing, some of us do the processing could include anything from fresh-cut processing, to the thermal processing to put things into cans, or freezing, drying, a whole range of things. Every food hub is different in response to the market demand that they see and the opportunity they see um… And then distribution obviously is getting getting food to to customers, to users And then some food hubs do participate in some kind of retail. So, we do we don’t do retail with a storefront But we do retail through a CSA through a farm shares program It’s a subscription program Where people can sign up to receive a share of produce once a week And then we do retail to a consignment partner a couple of consignment partners actually who… who hold our products and sell them for us for another for a commission. So, we we deal with other food hubs actually And So why is this why do people like this idea? Food hubs have gotten a lot of buzz in the past ten years And I think the main reason is that there’s been a kind of a groundswell beginning farmers as I’m sure everyone knows been an interest in farming and small to mid school farming and sort of saving agriculture of the middle and small and mid scale farms can access buyers that they can’t otherwise access through food hubs There’s reduced marketing costs through shared marketing. You know? So, if I market your product with my marketing budget, it’s sort of more efficient than ten farmers marketing their own product trying to do you know expensive branding campaigns and advertising And just sale cost of sales, you know actually like having a sales force. There’s efficiencies from sharing those kinds of services and and something I put in asterisk next to these these next three because USDA says, they’re really part of the defining characteristics of a food hub And this is where values comes into it so farmers are considered to be valued partners They’re very often participants on the management of food hubs there And they’re not considered to be interchangeable. It’s like when one farmers tomato isn’t necessarily Interchangeable with another farmers tomato because different tomatoes have different stories and different origins of the story as a part of how we sell the product for a higher for a higher price This story of the farmer actually matters in the value chain and So that ties in a differentiating product to get a better price so get that branding, that storytelling, making sure that the story of the farmer makes it all the way to the end buyer so that that story is kind of monetized and in the close relationship with producers, so Most food hubs are trying to be financially viable while also having these positive impacts on their communities, and that’s really challenging and We can talk more about those challenges in a minute, but this is this is a little bit old information But I just wanted to give a feel for kind of the flavor of food hubs, so in 2013 Arlene Enderton and Corry Bregendahl and all the Leopold’s Center did a survey of food hub activities and they found that 62% of the food hubs that participated in the study there was I think 13 food hubs in a study 62% were branding or labeling project products based on origin 54% we’re offering offering marketing services 23% were freezing their products and 8% were offering shared use kitchen so that farmers could develop their own products and In terms of what are the types of products food hubs are selling, again this is from Iowa This isn’t national and most of it was fruits and vegetables and then a smaller portion of meat and eggs So food hubs tend to have a strong emphasis on with healthy healthy products Healthy living food access for lower in communities in communities where it’s harder to get fresh produce and This is from a national study of food hubs with 107 participants And this was looking at what the organizational structures are food hubs And so I think it people have Depending on where they stand people have preconceptions that all food hubs or coops and farmer owned or that all of them are Nonprofit and grant funded, and it’s really quite a mix, so you know the it’s about almost half for-profit Which is pretty interesting because of how hard it is to break even with a socially responsible business like this that Half of the food hubs out there are actually people who are either you know self-funded or privately funded in some way You’re really putting their own assets on the line And then 34 percent are non-profits, and I think non-profits can operate a little bit differently because they They often provide more services because they have the resources to do so and of course they can receive grants and so… Nonprofit food hubs aren’t better or worse than for profits, but I think they tend to have a very different character and they sometimes or have a higher profile or a better better publicize because they have a very strong educational role in the community um As far as size So, this is an interesting study that was done a little while ago looking at the finances of food hubs around the country based on what they reported themselves and it… There’s a lot of disagreement over What the break-even point is for food hubs or whether there is whether you can say what the break even point is for for all food hubs, because some people are selling products that are really high margin. You know like… A grocery store sells products at a higher margin Some food hubs sell products where you know you’re adding 40 or 50 cents on the dollar to sort of pay for these the convenience the packaging the marketing services other other food hubs are selling products of a very narrow markup, so that really has a huge impact on what your breakeven scale of sales is but Generally speaking it seems like that breakeven is above 1 million And you kind of see how these are these are food hubs that were in the red So the one at the top that the category that was under $125,000 a year in revenue were, were quite a bit in the red so for every $1 of revenue that they were Making they were they were 42 cents in the red And then you start to see that that kind of reversing when you get up to this one and a half million dollar scale you start to see some profit But everybody’s different, and there’s some evidence to show that food hubs that are targeting smaller that are targeting I’m sorry. That are targeting direct to consumer markets can break even at a much lower scale even 300 to 400 thousand dollars and I have seen some break even in the $800,000 range personally um So yeah so the issue of scale is is a big issue and it really varies I think one of the things that happens is because food hubs are so mission driven they tend to keep reinvesting back into their infrastructure and And reinvesting in their mission, so if I get really good at breaking even serving 10 farmers. Who are of a medium scale maybe I decide that I want to expand my mission and serve five more farmers Who are of a smaller scale or maybe I decide? I want to make a large investment in infrastructure that’s costly in terms of loan interest or other new staffing because I want to be able to serve more farmers And, so sometimes the growth is driven by the desire to provide services and not necessarily by desire to make profit and so food hubs make different decisions So that’s part of why it’s so hard to… to see what breakeven is and some of them are not breaking even even at three or four million dollars And then that’s the issue of farm scale is something I think one of the people who sent questions ahead of time was asking You know is are the transaction costs too high if you’re buying from all these little small farms and trying to market for them to different kinds of customers like you know individuals institutions restaurants you know is is that ever gonna be viable? and And the answer is it can be viable but it is a lot of transactions to keep track of and Efficiency really matter isn’t the way that you manage all those little transactions, so software is important Communication is important. Having like really good… Having an enforcing criteria for how producers deliver products is important and scheduling delivery in a way, that’s efficient Because of all of all those little inefficiencies add up quickly and I think as far as dealing with price, that’s really important to manage farms to match farms to appropriate market so like You know we have some larger customers that are you know distributors that are looking for huge volumes or products at a at a pretty low price and then we have some customers who are individual households that are subscribing to our program and willing to pay a high margin for local food that’s also conveniently delivered to their workplaces And so a small farm is a good fit for… for that CSA that farm share subscription and that individual consumer because they’re willing to pay more That large farm who wants to do the large volume is probably a better fit for a large distributor, so I really believe in having many operating with farmers of different scales and and matching scale scale of the customer to scale of the farmer So a little bit about my food hub, this is just an example and we can talk about other examples later But we’re based in Charleston, West Virginia already talked a little bit about us. We have Like a lot of food hubs, we have several different types of market outlets We don’t just sell to institutions or farm to school. They don’t just sell to restaurants We really spread out our markets And we do that because different customers have different characteristics and fit different farms So the farm shares are like a community supported agriculture program. They’re prepaid and we Those are really valuable to us because they help with cash flow because they help They help kind of subsidize The other co… the other customers you have longer payment terms like institutions and schools take longer to pay you and so we need a mix of customers that pay quickly and customers that that don’t We have an online market that we’re just now launching which is are supposed to be the on-ramp for customers who are just starting to buy local food from us who are individuals, to try to onramp them so subscribing to farm shares And we’re just now trying that out We do consignment with… with some retailers and then we do a weekly food service distribution where we drive a truck around and we delivered to to restaurants and hospitals and schools and… We actually worked quite a bit with other food hubs I think that’s maybe something surprising that people don’t realize is that food hubs really depend on each other to get products that they don’t have access to in their own region, and so we actually are currently merging with another food hub so that we can cover the whole southern half of our state And we partner with the co-op that specializes in aggregation and sort of producer coordination so that we can specialize and distribution and sales And I think that kind of specializing really helps make us all more successful But we also do other things, and I think this this makes this is like what gives us a unique flavor as a non-profit is we do beginning farmer training program like I talked about. We also offer a poultry processing We have two mobile poultry processing units that we take to farms and process on the farm We train people how to do that, and then we try to mark, find markets for that poultry We’re currently working with a meat distributor who were hoping will sell our whole chickens, and then we have… We have farmer workshops. We do a lot of training and capacity building with farmers in the area And that all is done through grant funding And we are heavily grant subsidized right now because we’re a smaller food hub, and we’re still getting to the break-even point So, I’m gonna stop there So you’ve gotten a general introduction to what food hubs look like and then a specific introduction in my food hubs, and I want to turned over to Kayla to talk about food hubs in Iowa I saw that we had one question in the Q&A box, but maybe we can wait and address that at the end because I think we’re a little ways past when it popped up So if that’s alright, we’ll look at that later So I think that some of my Some of my slides are gonna… gonna mirror a little bit of what Savanna talked about so I won’t go into depth on all of them, and I’ll probably stray from them quite a bit so Let me start by introducing myself I’m Kayla Koether As Savanna said, I now have the the work of managing the food hub managers working group with Jason Grimm, and we partner in that work I’m based at Iowa State Extension and Outreach, and that’s a position that’s partially region 4 and partially the state Local Food Team So, I do a range of work including working with beginning farmers and helping farmers network, and write business plans, and access what they need But also helping the food hub managers get together and address their their challenges and shared needs in the state So, I think you know after we talked a little bit about what Savannah just shared a lot of the things that I have in these slides are going to be is going to be similar But I think what I think I’d like to pull up and take a look at here… is this graphic that I think helps to describe a little bit of what Savannah was talking about how food hubs can work with different size and different of farms and That… that’s important because when you are looking at the institutional customers that a food hub might be working with they might have different needs and so as we try to support farmers on the landscapes that are at these small and medium-sized farms were able to mix and match what somebody like say a Luther College in our area or a large hospital or a Hy-Vee might need and what they’re looking for to put on their shelves at a certain price point and what their customers are demanding with what our farmers in the area are providing So, I think that is the the flexibility that you know and this is an example of what the Iowa food hubs preferred attributes are for who they work with, but at the same time they have the flexibility to serve all farmers starting with the base idea that things should be local to the food hub And then sort of ramping up with helping beginning farmers and small and medium-sized farmers at the top and folks who have certifications like good agricultural practices or be an organic certified and so there’s a component of that that is helping people improve their farm operations to where they can attain different certifications as well as they as they’re able to work with the hub and find markets So, I guess looking at some of the food hubs in Iowa, I’ll take us down to a slide here We have a lot of a lot of organizations in Iowa, that are technically considered a food hubs and they all have pieces of that USDA definition that Savanna shared where they are aggregating something and distributing it in some way This is a map of all the organizations that were identified in 2015 by as food as food hubs in some definition or another Some that we would think of as more traditional food hubs or those that are really heavily involved in the Food Hub Managers’ Working Group, that I managed, include the Iowa Food Hub, which I just showed you there producer to your slide. They’re here in Northeast, Iowa Farmtable Procurement and Delivery in Western Iowa, I wish I could point to my computer screen right now Maybe I can do this with my mouse so Farmtable Delivery is out here in Harlan in Western, Iowa And you can see that this is sort of the coverage area for her hub and that is a privately owned hub by Ellen Walsh-Rosmann, and then the Iowa Food Cooperative is based here in Des Moines The Iowa Value Food Co-op is kind of undergoing a transition right now, so they are sort of reinventing themselves and then we have the Iowa Food Hub here and This map is a little dated, but this specific, these overlapping concentric circles, are hubs that have been working together on cross docking food in the state, so… They have been helping farmers in one region get their food products all the way across the state to sell for example, milk that might be produced up in Waukon, Iowa can make it all the way down to the Iowa Food Cooperative in Des Moines and out into Allen service territory in Western, Iowa and therefore reach a bigger marketplace, so In addition to these hubs covering different kind of parts of the state. They’re all organized quite differently So as Savanna has been talking about, hubs that are aggregating and distributing produce a lot of a lot of these hubs are doing produce, meat eggs, a variety of foods, and they might be selling them into larger institutions like the Hy-Vee’s or the colleges, but then there can be a huge diversity so the Iowa Food Co-op in Des Moines They have a really unique model where they have an online grocery store and it’s a cooperative model so both both buyers and farmers are members of this co-op and when you are a farmer that’s involved in it Every two weeks you’re able to post what’s available for folks to buy from you and the quantity on an online marketing and online management system And then customers can come in and actually shop for what they want and buy it from a specific farmer Then farmers deliver all the product and… and folks actually show up in person to pick up their products And so that’s an example of a hub that’s really facilitating retail sales directly to a consumer who’s gonna buy it directly from the farmer through the hub, and we’ll have complete source verification because the consumer is actually choosing the specific farmer that they want to buy from And that’s also an example of, once again, I talked about hubs that can be a little bit lower in annual sales to break-even That’s true of a hub like the Iowa Food Cooperative because they are capturing retail sales dollars in able to… to make the most of the full value of the dollar that the consumer is paying in order to support their staffing needs and their space needs Then you can contrast a model like that to something like the Iowa Food Hub, and so you can see that the Iowa Food Cooperative is serving a smaller territory As soon as they are direct consumers and consumers are physically coming to the space, but you can contrast that with a model like the Iowa Food Hub that we saw the tiered producer model of and they have a bit wider of a service area In fact, they’re also going to Chicago, but a lot of their sales are to larger institutions, and so they’re not receiving as much of the total consumer dollar because they’re working with high volumes high quantities of of products and not able to add a whole lot a lot of Markup to those products as they go into the wider distribution chain and go to other retail outlets before they reach a consumer So there’s kind of a there’s a big contrast and many different models for what food hubs are able to do and I think looking at kind of a larger hub in contrast to one that’s that can break even at a smaller scale what the main thing that you’re going to see is the difference between doing direct sales to consumers and being more eclipsed in the food chain by working with some of the larger players in the food chain and not being at the consumer end of that chain. I see you have a question here, okay. So Carol says um that… “We’re just starting our process of seeking markets and have heard about hubs trying to get as up to speed as possible, so what is cross docking and what our transaction costs?” Okay. Thanks I’m glad for people to ask questions Carol says this question’s basic, but um it’s important to keep everyone on the same page. So cross docking, Carol, is essentially when hubs What’s the easiest way to say this? They’re just moving product between one another, so they might park a product at a space and another hub picks it up and They’re using that space to… One… one person might have a route that’s swinging through and meeting another ones route and so they’re picking up from one truck and putting it on another and moving it from one distribution area into the other hubs distribution area I hope that answers that question efficiently Transaction costs are essentially the costs that it takes for a hub to do business and maybe that question was kind of in relation to some of what Savanna was saying earlier about all the costs of, you know, when you are organizing 20 different farmers to fill an order for one school or one institution say You have a lot of time costs and other investments into, you know, invoice or making this purchase from each of those farmers, communicating with each of those farmers, keeping each of those farmers, or keep getting an order from them getting them to bring the produce in at the right time, getting that all prepped And so you have more of those types of costs as you work with more smaller farmers than if you’re able to source from one larger farmer, and that where Savanna was talking about managing those transaction costs Okay uh Okay, so one other question from Carol is, “Are there charging for cross docking, or is it pure collaboration?”, and I think that’s one thing that I’ll move into talking a little bit about the Food Hub Managers’ Working Group now and that I’m really proud of in Iowa that these hubs because Savannah and others got this group started um Is it three years ago now, Savanna? Yeah give or take um that a lot of the hubs in Iowa have really great relationships with each other so They it varies how they cross dock and it depends on what type of product they are moving, but in some cases one hub might be selling the product and another hub might be buying it In some cases a farmer might have might be asking one food hub to transport it for… for them and be paying that hub and then also paying the next hub who struck it goes on to To get it to its end destination So a term that you that’s well… that’s worth knowing is constructive ownership and it depends on who has actually purchased the product and that’s a good distinction to make between how food hubs operate as well because like the Iowa Food Hub.. Food Co-op that I explained to you where there’s an online marketplace The co-op itself is not taking constructive ownership of the product. They didn’t buy it from the farmer, and then resell it but some of the hubs are taking that constructive ownership. They bought it from the farmer, and they maybe bought it from 15 farmers And now they’re going to sell it to a school and the school is going to cut a check to the food hub This gets a little into the weeds But as savanah was talking about some of the some of the requirements for what might take a food hub to break even The more you’re taking constructive ownership of something probably the higher you’re going to need to have in sales to break-even Because of the fact that you are now having to put all this capital into purchasing product and turning that around, and so you know like sometimes a hub might you have sixty thousand dollars of sales in a month and they’ve had to purchase a lot of that stuff and pay farmers before the institution or school or Hy-Vee is actually paying the hub Which means that they have to have a good line of credit to be able to carry those expenses in the gap between making payments to farmers and getting paid back from their buyers if that makes sense Let’s see, so I want to talk a little bit more about the Food Hub Managers’ Working Group and what we’ve been doing recently because there are a couple questions about that And I think I can stop sharing my screen you know We have been getting together quarterly and visiting each other’s food hubs so that people can see how how each other’s models work and share some best practices and and try to find ways around some of the obstacles that they faced Most recently the hubs got together and we invited in a financial… a person who has a lot of expertise in financial management for hubs and food businesses, Tara Johnson And so she spent four days with some of the hubs who have been operating for three years and have a lot of data about their sales and operations to kind of a foot a foot to start off on to work with And so we were able to do some really intense work around how food hubs business models are working. What their financials look like and how they’re gonna get to a point to break even Because it is very difficult to get to that point in a business where even even like the big food distributors are only making about like coming out of like two percent of their annual sales in terms of their kind of take-home pay So I think it’s important to realize that food hubs are an answer to the questions that Savanna posed earlier of how do we get institutions to buy more local food, and how do we support local farmers? But at the same time they’re very difficult in terms of a business model to make money and… So it’s really important that as people look to starting food hubs or supporting food hubs that that we be really pragmatic and really learn what we’re going for and what it’s going to take to break even because… because it is really hard, yeah So, I wish I could hear you guys, I’m kind of wondering I don’t want to I don’t want us to go on too long. I’d like to to open… Maybe Savanna and I had chosen a couple of the questions that were asked prior to this and maybe we could address a couple of those and also if people have them where they want to add in the chat, we could start looking at those and seeing what ones we can answer as we look at the the ones that folks had posted before we started How does that sound to you, Savanna? I think you’re still muted Thank you! Oh, there’s an echo now if you could mute yourselves other presenters. Thank you. I just wanted to show y’all a A place where you can go to get some more resources, and I just had it up on my computer Just bear with me for a second Um if you if you go to the extension store, and I think I can share this with you So the ISU Extension store has a lot of really great resources, free publications on it they have price tags but the price tags are mostly zero and Hopefully you can see this. So I actually you when you first go to the store, there’s a search panel up at the top, and I actually just searched for my own name and found my publication so there’s a bunch of… I’ll do that first um I Just want to show you a few things that you might find interesting if you’re wanting to get into the weeds with starting food hubs or managing food hubs this Managers’ Guide to Food Hub Finances is a… It’s a guide to using financial metrics to evaluate the sustainability of a food hub But it has answers to a lot of common questions about things Things that come up and pricing is one of them I saw there was a question about pricing so I interviewed some food hubs about their approaches to pricing and that may be I use a useful resource. There’s also a series that I worked on with Theresa Wiemerslage and Nick McKeon when he was in Iowa on different examples of meat of school programs in Iowa, so you can take a look at those publications There’s using accounting software for food hubs and processing traceable orders It’s a hopefully helpful introduction to QuickBooks for food hubs But also to kind of the idea behind traceability which is something that’s increasingly important with with the Food Safety Modernization Act and more and more customers expecting good agricultural practices certification Which requires the kind of traceability where when you sell the product to a customer the customer should be able to pick up a box that’s sitting in their cooler. If somebody gets sick, there’s some kind of foodborne contaminant they should be able to pick up the box and look at the box and either on the spot identify the producer it came from the date that it was harvested or you know series of information like that or to receive a code that they can then call in And you have that information which is more common to use a lot number And it was some kind of a traceability code to to archive all of that so that you can do a recall of all the similar products that were harvested from you know the same field by the same farmer around the same time and This is a publication that helps you see how to do that using QuickBooks Which is an interesting exercise, and there there’s also a resource down here Somebody had asked about cash flow And this is probably my favorite publication it’s, that I’ve written, is managing cash flow for a low capital food head startup, and it just has some like general ideas and guidelines this was based on Iowa Food Hub and what they did with their farm share subscription program. And studying them helped me to understand why a subscription program or farmers where where customers prepay is so valuable for managing cash flow and not ending up with zero dollars in the bank account Especially if you’re gonna be targeting some larger customers like institutions So I really do see those kinds of sales as a compliment to institutional sales that really helped farmers break into a new market where maybe they have been able to sell to that at school at that hospital before And I think like it also talks a little bit about accounts receivable and just the importance of not extending too much credit to customers, because customers you know will wait will sometimes wait for a long time to pay and you really have to manage your accounts receivable carefully and and stay on top of customers who aren’t paying on time So there’s some there’s some thoughts about that in in this publication and also in the Financial Metrics publication that I showed you a minute ago So I just wanted to provide that as a resource and if you if you enter food hub into.. into the extensions source search site you’ll find lots of other publications besides the ones I wrote There’s all kinds of good resources available so make sure you use them Kayla did you have a question that you want to take a stab at that was kind of my effort at addressing the question about cash flow and some other things Sure, so one of the questions I kind of wanted to answer, and I’m not sure if I did it in that map I had on the screen earlier Somebody had asked about what like how can they access a food hub in their part of the state and… and find food hubs, so I think there’s kind of a two part to that question because when I showed that map earlier it looks like there’s a million food hubs in the state. But some of those top layer are you know like a dairy company that aggregates milk from multiple farms, and so the only thing you could get from them is bottled milk or whatever that might be Versus like Farmtable Procurement and Delivery that could service you with you know a variety of products from vegetables to beans to milk So I guess the way to do that I think, probably simplest, would be to get in touch with me or Jason Grimm and sort of try to tell us where you’re at in this state and what you’re kind of looking for in a food hub and there are a lot of areas of the state that aren’t actually covered by a food hub that has a distribution route So again, to contrast a hub like the Iowa Food Co-op in Des Moines where farmers are bringing in product and showing up in person and consumers are coming to the site in person to pick up From a hub like Farmtable Procurement and Delivery where the hub has a truck They go pick up from farms, and then they run a route through other towns You know the service territory is a lot wider when you are driving a truck around And they’re more able to service certain towns in that area so I… I think that the answer is that there are different hubs in Iowa, which first of all serve different territories But then also fill different niches and in whether they’re dealing with retail consumers or larger scale consumers or even what products specifically they’re selling So I think it would be… You know something where if you can just describe what you’re looking for and where you fall on that on that map We could sort of put you in touch with folks that could help out There’s also been a talk of the possibility of having some nodes in Iowa, because as as we talked about It requires a pretty large amount of sales to reach higher institutional consumers if you’re going to be that type of a hub And so you know if there are local farmers around you that want to get their product into… into a hub situation, but maybe you don’t have quite enough opportunity for sales that you could start a hub You know being a node where you could help other hubs aggregate produce or meat or whatever it would be from your local farmers and get those into distribution through the a existing hubs Logistics chain could be really helpful for your local farms without having to go to the whole expense of the learning curve of setting up an entire food hub and trying to get it to a size that will break even Yeah, just to highlight that I think… We’ve seen this like swell of people starting food hubs and aggregation sites like all over the country You’ve seen it in West, Virginia, and Iowa has seen it too, and I think that almost everybody who’s out there running a food hub is right now trying to figure out how to merge with somebody else or to share infrastructure with somebody else They’re either doing it through some kind of cooperative agreement with another food hub or distributor or they’re doing it by like actually merging with someone else and um… That’s just something to be aware it and just like it’s so hard to get up to the right scale where you can be self-sufficient, and it’s so much easier if somebody else is holding all of the infrastructure that’s expensive to operate Like someone to call up customers and do sales You know someone to develop the branding package, somebody to manage the software, somebody to do the invoicing Like if you’re thinking about starting and trying to find a way for farmers to get their products to market You’re so much better off if you can help them somehow access somebody who’s already doing all of those things and has this like farmer centered mission at heart so like… Just an example of what we’ve done. We have there’s a co-op that’s formed in Wayne County, West Virginia It’s an area really impacted by the decline in coal mining and a lot of people lost their jobs And so this co-op has formed over 110 farmers. Just like out of nowhere Who all want to try to generate more income by farming and they don’t have a lot of infrastructure, but they have their relationships with each other and they’re really willing to put in the time to coordinate and to agree on prices and sort of use people power to… to get sales and we in return for their people power and you know the information they’ve given us about farmers in the area We have put a like a satellite cold storage unit at a location near them, and we’re helping them with production planning, and doing trainings for their farmers, and we’re providing the infrastructure that they need to get their products to market so that they don’t have these like heavy costs that are just way out of proportion to like the scale of production that they’re doing So I really just like encourage folks to look into those kinds of options so reach out to the existing food hubs like the ones Kayla mentioned like Farm Table Delivery, Iowa Food Hub, Iowa Food Co-op. Figure out if there’s a way to connect with them before trying to start something new One thing that Savannah just suddenly made me think of something that I think highlights the complications of running a food hub as well um Because other distribution businesses especially when coming when it comes to products that are not available year-round like produce Other distribution businesses that are getting those products from places that are that are not growing seasonally From far away. They don’t have to worry about having enough supply at the right times And so you don’t have to sit around in production plan with farms to figure out… You know we expect schools to buy X number of pounds and potatoes in this month, and we need to figure that out eight months in advance so that some farmer can put sweet potatoes in the ground and be ready to harvest them at the right time, and we can line that up with what we expect the purchasing to be And so that’s another whole area of logistics to try to meet a market demand and and try to predict what that is really far in advance so you know When you when it comes to working in a local area and working with the seasonality of a local place in the in the Midwest or somewhere that’s more seasonal You know hubs are at a disadvantage to their other competitors who are selling produce that isn’t source verified or isn’t local, because they’re not as flexible about the timing of where they can get it and the quantities that they will have available So I think you know, on the one hand the the niche and what they’re allowing consumers to do by feeling good about buying a local product By having more control over how that product is produced and knowing the source verification puts them in a place where maybe they can charge a little bit more, but on the other hand they’re facing some really significant challenges that their competitors in the general scheme of the food distribution do not have to deal with and that makes things a lot harder too, so… I think people tend to think both of farmers and of of kind of food businesses that are entering the niche space that… There’s a lot of money to be made in it And I do think that it can offer small medium farmers a livelihood that they wouldn’t be able to find in commodity markets at the at a smaller size of a farm But at the same time there are other costs associated with getting certifications or selling it seasonally both for farmers and for hubs That that we can’t really overlook as we look at the entire food system, and how we can make these businesses profitable and sustainable So what are their questions do people have? There’s a chat box and a Q&A and I think you can enter into either we can keep a keep an eye on both So I’m hoping people will type some questions, but while… while we’re waiting to see if folks do I there had been a question sent ahead of time about price, and so maybe I’ll talk a little bit more about pricing um So Kayla talked earlier about how the… the margins or markups tends to be larger for retail than for for food service or wholesale distribution So um just to give an example like one of the food hubs that I studied their margins were anywhere from thirty to fifty percent of the sales dollar for their retail sales where they were doing a CSA type program and a subscription program, which is really high That’s higher than average I’d say But so that means that for every dollar that a consumer paid thirty to to fifty cents was going to the food hub to pay for their operations and the rest is going to the farmer and that sounds sometimes you can look at at different ways you could say like oh wow that food hub sure is skimming a lot off the top, but really what matters is the price that’s paid to the farmer I think so… You know if a food hub is really good at marketing themselves and really good at finding a customer who’s willing to pay more for the product. Um then it kind of doesn’t matter what… what they’re charging as long as they’re paying the farmer with the farmer needs, and it’s supporting the food hub and um So retail retail is appealing because there is more flexibility from consumers. Some consumers are really sensitive to prices, but there’s a lot of consumers out there who they just don’t budget as tightly as like a cafeteria manager would. You know somebody who is operating on this incredibly narrow budget, you know trying to to make school lunches you know for less than three dollars per lunch, so… So that’s why the margins are different on retail, and also there’s more that goes into retail because it’s um… it’s a more labor intensive type of market. So you you have to deal with lots and lots of little transactions We talked about transaction costs before those those costs that go along with each sale And you just have lots of little, you know, lots of little invoices to handle and you have people with customer service issues who might be paying might be buying a $10 product instead of you know $200 worth of product. They might have the same number of customer service requests and questions and issues So, that’s… that’s kind of why retail has a larger margin So it may not may or may not be a better deal when you look at all the costs of doing retail or direct to consumer sales to individuals and households But but sometimes it can be a better deal So as far as wholesale, there’s a lot of different philosophies about what’s an appropriate margin for wholesales, so how much of each sales dollars should be kept by the food hub for operational cost I usually it’s usually in the neighborhood of 15 to 25 percent. I see a lot of people operating rated about 20 percent So that kind of that’s that’s the flip side of… of a markup, so markup is like a little bit numerically differently different from a margin instead of being like the portion of sales dollar that the… that the customer pays. It’s like how do you multiply the price, the purchase price to get to the final price that you’re gonna sell? I’m sorry. This is like too much jargon. You can just ask me questions, and I’ll stop but… But it’s helpful to understand the difference so so markup is like I buy the product for a dollar I mark it up by 10%, and then the product costs a dollar 10. So the end consumer so the margin of markups are smaller for wholesale than retail and… So you should so you should benchmark them in different ways you should use different tools to make decisions about what the right price is So, you know, for… We compare our prices to for for our farm shares for our direct to consumer sales we compare them to farm CSA’s We see, you know, whether we’re charging what farms are charging for similar subscription programs on a weekly basis And with our wholesale we… we look at what our customers are currently paying, and then we usually charge a little bit more because we have to you But we try not to base too much of our pricing off of the market And we try to base it more off of what farmers say they need, and so there’s like that’s why it’s so important that that the farmers you work with understand what their costs are and what prices they do need to break even on their on their products, and I feel like that’s really the role for extension. I feel like extension and food hubs need to have a really close relationship with each other, because if farmers don’t understand their own costs and they’ll never be able to tell you a price the price they need. And you’ll and you can’t use that as a starting negotiation point. If the farmer firmly understands what they need to make a living, then that becomes a negotiation point with your customers that you can you can go back and forth with them And you can vigorously defend your farmers price, and it doesn’t always work that way but it can work that way if you if you’re good at communicating with your customers and Red Tomato kind of fizzled, they’re a large food hub in the north east. They kind of introduced that idea to me They call it dignity pricing. So you always start, dignity pricing, you always start with the price that the farmer needs, and then you negotiate from there with an idea of what the market expects. You know what the difference is going into the conversation between what the farmer needs and what the market expects but you but you start with what the farmer needs. So that’s kind of my philosophy too on pricing and I see we look like we did have a question here So we had a request to go through some of the types of hubs No not a confusing question, I’m just thinking how to answer it. I can help a little bit. Yeah, go ahead So I guess you can look at this maybe from a couple of different lenses and they always say when you’ve seen one food hub you’ve seen one food hub because they can be so different So I think one thing to keep in mind is, there are hubs out there that can that are food hubs that might be doing some of the sales but also having a big educational mission or component and possibly even doing more educational programming but So you can probably think of it in terms of hubs that are doing a lot of sales versus hubs that are doing sales and a wider mission or even more of a wider mission But then when you get into the hubs that are doing sales, you might try to divide that, if you had a little tree, into hubs that are focusing very heavily on direct to consumer sales versus those that are considered that are focusing more heavily on institutional sales and… From there you could take the institutional sales and think about hubs that are not taking constructive crit… constructive ownership of products. So they’re just sort of doing a brokerage situation where maybe, you know, they’re they’re not actually buying directly from the farmers They are helping the farmers organize themselves to aggregate the products And then they’re selling that into the accounts, and they’re simply being paid a fee to do that So even though they’re still selling to larger consumers, they don’t need quite as much of a sales to break even, because they aren’t having that cash flow issue of buying all this product and then selling it all the accounts. So so on the institutional side you have that sort of brokerage type of food hub, and then you have a food hub that would be more taking the constructive possession and From there you could even have hubs either of those types of hubs might have their own trucks and distribution routes or they might be working with third parties to actually get those products picked up from farms and take them back where they need to be So, it’s hard to sort of typify hubs as to like you have this type in this type in this type. It’s sort of a tree of of choices that you can make as a food hub manager about what parts of the food system you, of the whole food chain, you want to try to… to actually do yourself and what parts you are going to work with other types of businesses to do to get the products where they need to be Does that make sense? And Savannah do you have some more observations to add to that? That was kind of an answer on the fly. Yeah I thought that was helpful. I mean I think, you know, it does go back to like you said which parts of the food chain do you want to be part of? So do you want to be involved in processing, or no? Do you want to be involved in? aggregation, or not? Do you want to be involved in distribution or not? Are you gonna… And every food hub is so totally different. They all have different sets of costs. They all have different sets of services That’s why it’s almost like tricky to evenly label them under one name so You know I just encouraged folks. There’s a lot of like literature out there about the food hubs, and I just encourage you to realize that somebody you might be reading about out there who’s doing something, seems to be doing something similar to what you want, they might actually be totally different. Their costs might be totally different Their motivations might be totally different, so not all not every example necessarily applies, but I think Kayla mentions the question of whether the hub is going to own the product versus sort of be acting as a broker for the product, and maybe you know taking it on consignment or you know you know just like selling it for it for a commission, and I think one really important difference between those two approaches to understand is that when you’re taking ownership of the product you… You have a little more freedom to be entrepreneurial with your pricing depending on how your system is set up, but you know if you buy a product for five dollars you can go to the market that will pay ten dollars or you can go to the market that will pay six dollars and you have you have freedom to change the price and you absorb the consequences positive or negative of how you change the price and and so… I think that I think that allows you to maybe access customers you wouldn’t otherwise access. Maybe by lowering the price a little bit, or it might allow you to… to capture a bigger margin than what you expected if you realize that you’re coming in below people’s expectations you can raise your prices, so I’m kind of an advocate of taking ownership. The other reason that I like, well there’s two other reasons I like taking ownership of products. One is that it’s better for the farmer or it’s often better for the farmer to just to be able to sell products outright to a third party and not have to worry about marketing through somebody else I think those farmers would really just like to take a truckload of something and sell it all at once and get a check and And then the third reason is when you buy the product outright and then resell it you have, there’s two ways that you can impact your own profitability. You can increase what revenue through your sales and marketing efforts and you can control costs through your efficiency and if you’re if you’re asking as a pass-through, and you’re and you’re just providing a marketplace for farmers like an online marketplace is an example. And farmers just post the products customers go on they buy the products directly from the customers, and you know the food hub automatically gets 15% or whatever it is. Like the food hub doesn’t control doesn’t have as much control over this over the volume of sales they don’t have a direct as much of a direct role in the sales and So really the best way for the food hub to be profitable is just like just to control costs just to cut costs and keep costs low for every transaction, and that’s not necessarily the nicest position to be in to just be worrying about costs, so That’s that’s just my take on it. That’s why we we buy products that read from farmers We own them we put them in our scold storage, and then we sell them But but a lot of food hubs are very successful with consignment models or brokerage models They just have different… different things that go along with them One food hub, that is a little unique that I thought it’d be fun to point out that as part of our Food Hub Managers’ Working Group, is Iowa Choice Harvest and they they are flash-freezing corn and other vegetables and then marketing that under their own in-house brand So you know whereas somebody like Farm Table Procurement and Delivery might be selling black beans labeled from Jason Grimm’s Grimm Family Farm Somebody like like Iowa Choice Harvest has not just a brand as a distributor, but a brand as in like you pick this brand up in the grocery store, and it is co branded by the farmers and falls under sort of one marketing Idea. And there’s no… I don’t know if I’m not describing that quite as succinctly as I want to Because there’s still a brand associated with the hubs, you know, somebody knows if they’ve bought something from farm Table Procurement and Delivery But they also see the the product as the farmer has packaged it with the farmer’s logo or whatever marketing they have on it Versus something like Iowa Choice Harvests, which is aggregating produce from multiple farms and then bringing it under one big umbrella brand for the customer and sort of sort of guaranteeing that the quality from all those farms will be the same through their their freezing process, and through picking out the same varieties of corn, and planting it at the same certain time, and picking it at the same type of maturity, and freezing it on the same process. If that makes sense, and even though that’s very different than some of the other food hubs that we’re sort of looking at and talking about it also functions like a hub and that aggregation and distribution fee piece But there is now also a processing component in there Yeah, and that that question about how much should there be labeling for the food hub? Should there be labeling for the farm, like how many entities… How much do we need a source identify this product and what does the customer care about? I think it’s a really big question I think it really depends on who the customer is and what you know about them. Like, we’ve been dealing with a distributor that works with grocery stores and trying to decide whether to work with them and one of the reasons that they want to work with a food hub and that I think we could be beneficial to farmers is if they’re gonna carry local carrots they don’t want to have in their system they manage according to item codes You know they carry a certain number of products in their in their product line and each product is… They call it they call them SKU’s, because each one has an SKU number. So it’s like I have you know whatever five thousand SKU’s I have a lot of items in my product list, and they don’t want a different SKU for every local farm that has local carrots It because they don’t want customers to have to look at a price list that has these five different use from five different local farms and try to figure out what the differences between them So they want to carry one SKU that’s carrots, or… or you know carrots of a certain packaging size or whatever, and one SKU that’s local carrots, and that’s it. And so working with us gives them the ability to carry fewer SKU’s, like to just have like their representative local products. We because we… We can provide a lot of product that you know from the customer perspective is like somewhat uniformly local carrots, but but but then we lose a lot of value when we do that because we don’t have information about the farm on the carrots and so how do you get that story? That’s that story that translates into dollars How do you get it to the customer with the carrots? And that’s where you know you see like on milk cartons sometimes, you know it’s like Organic Valley or we have Snowville Creamery in our area They’ll they’ll highlight a member farm of a group of farms to try to convey some of that story to the customer on the packaging of the product, so you know… I don’t know if my if my milk from Organic Valley came from farmer Abe or farmer Joe, but but I know that there’s a picture of farmer Joe on the side which gives me an example of the kind of farmer my products might have come from come from. And so it’s like it’s tricky figuring out that right level of like traceability and transparency in the supply chain that gives the customer just the right amount of information so that they they know they want the product and they’re willing to pay more for it because because it’s local but also to make it really simple for whoever is for your distributor if you’re working with a distributor to carry the product without having to worry about all these different farms different farms. If that makes sense So I feel like it’s kind of a balancing accidents like a messaging and packaging marketing challenge Looks like we got another question So I would have a question for some of the participants How many of you are in a position where you would be looking to purchase something from a food hub, versus a position where you feel like you need to help some type of food hub start? Yeah are any of you trying to find out how to buy things from a food hub I guess, versus are some of you trying to figure out how to organize a food hub? So if you could type in the chat box if you’re in either of those positions. That’d be interesting I saw the question from Carroll about, do we have a road show he can bring to Kentucky? I’d be happy to talk to you offline about that since I’m in West Virginia, which is close but there’s also a ton of resources if you haven’t already checked out the National Good Food Network website They have a special page for food hubs if you just Google National Good Food Network Food Hub or Wallace Center Food Hub There’s like a huge archive of webinars and resources and they also do kind of boot camps for food hubs around the country, or at least they they were doing that up until recently That’s another place to look for training I’ll put that in the chat box. The other thing that would I think interest folks is a podcast from Tara Johnson called “Edible Alpha”, and she interviews all kinds of food businesses on there and a lot of the a lot of the interviews are pertinent for food hubs too. But she does have a couple maybe more than one, but definitely one really good podcast with the Wisconsin Food Hub Cooperative and If I remember right, they’re a brokerage food hub that deals mostly in produce in, Wisconsin So, that that would be a good thing to listen to I’ll put that in the chat box too Savanna I think you’re muted Somebody chatted in the chat box, and I don’t think everybody could see it. We were talking about different labeling, labeling in a way that makes the source farm more transparent to the customers And he said there’s a hard cider company in Wisconsin the aggregates apples from nearby farms for processing. That they have different a different stamp for each apple farm and each each six-pack has the stamp. So that’s like a great example of sort of item level like product level traceability or transparency for the customer about where something came from So I’m gonna say that we wait we wait to see about questions for another minute or two and then if we don’t get any more questions, maybe we’ll wrap up That’s an idea Questions or comments if you guys have any comments or thoughts that this food hub or that this food hub webinar has brought to mind be interesting to to hear too I’m gonna go ahead and share the screen one more time with my contact information in case anyone wants to get in touch. Oh I just had it Might have closed that actually hang on I’ll just put it in the chat box I just put my information in the chat box as well, and that’s my cell phone number, so I’m usually pretty easy to reach at it Okay, well we appreciate y’all visiting with us and feel free to contact us with other questions that you have. So do you have anything else to add before we wrap up? I don’t think so. I think we’ve kind of touched on a lot of different resources that are out there This webinar kind of scratched the surface, but also went into depth on a few things as it’s hard to kind of stay at… stay at the surface and not dig too deep into some of the details But if you need some of those resources reiterated don’t hesitate to to reach out because there’s a bunch of different organizations that Savannah mention that can give you really good ideas that where to start if you’re digging into specific questions Well, thanks everybody for for coming and for your interest in food hubs and working in local food development and Yeah, appreciate this topic being brought up and glad that when Lynn got us together today and Emily. Thanks for hosting Thank you guys, great job! Thanks, take care. See ya. Take care everybody