In January Wholesome Wave hosted the Transforming Food Access Summit in Atlanta. We attended the conference to co-host a session with Farm Fresh Rhode Island, a food hub in Providence that is having tremendous impact on community health. Our panel explored the intersection of local food and healthy food access. It was an exciting opportunity for us, given that a number of our more recent projects have been focused on if and how food hubs, and local food systems development, can be designed in a way that positively impacts health outcomes, particularly in underserved communities.
The conference was so energizing and inspiring! Speakers from the health care industry, government and advocacy groups came together to share stories, explore questions and develop ideas with the goal to build stronger programs that create affordable access to better nutrition.
I learned about hospitals creating food pharmacies, a healthcare system building a grocery store in an urban food desert, and an insurance company providing medically appropriate meals to help patients fight against disease, to name just a few. If you want to get inspired, check out the following articles and videos that describe these amazing programs.
- ProMedica’s Food Pharmacy in Toledo, Ohio allows patients to fill a prescription for food just as they would for medications at a pharmacy. The Food Pharmacy is stocked with food that is selected by experts to positively impact the patient’s health (video).
- ProMedica also just opened Market on the Green, a full-service grocery store in a Toledo neighborhood that lacked easy access to healthy foods. The store occupies the first floor of a brand new institute that also offers nutrition education and job opportunities for residents.
- Farmacy is a pilot program of Mountain Comprehensive Health Corporation, a network of health clinics in rural Kentucky. Patients receive vouchers redeemable for fruits and vegetables at the Letcher County Farmers Market, benefitting both the farmers and the patients. While similar programs are offered at farmers markets across the U.S., some through Wholesome Wave’s FVRx® program, what is stunning about Farmacy are the results: 83% redemption rate, high enough to drive 50% of market sales in 2015, and an average BMI reduction of 3 points among participants.
- Health Partners Plans, a health insurance company serving greater Philadelphia, teamed up with local nonprofit MANNA to offer a home-delivered meal program that provides at least 6 weeks of medically-modified meals for patients needing nourishment to manage disease (video). The program is the result of a study finding those who receive meals and related services have significantly lower overall health care costs. The benefits are found to be so significant that the program also delivers meals for dependents. This ensures that the full portion is available to the patient who may otherwise share it with the family.
What these programs all have in common is their recognition of the critical role that nutritious eating plays in maintaining health, and preventing and managing disease. Some of these programs prioritize local healthy food as part of their definition of “healthy food access” while others do not.
The role of food hubs in healthy food access
Our session explored two questions that seem to be coming up more and more: Should healthy food access programs prioritize local food? What impact can and should food hubs and local food have on healthy food access?
Farm Fresh Rhode Island (FFRI), our session co-host, is one of the most innovative food hubs around when it comes to healthy food access. They run a traditional aggregation and distribution enterprise, and these revenue-generating businesses provide the infrastructure to support a myriad of programs aimed at increasing food access while also boosting sales for area farmers. Thea Upham, Program Director, highlighted the following FFRI programs:
- Fresh Bucks are currency for fresh food from local farms and producers at Rhode Island farmers markets
- Healthy Foods, Healthy Families healthy shopping and cooking education at farmer’s markets
- Fruit & Vegetable Prescription Program for at-risk families, similar to Pharmacy mentioned above
- RI Farm to School Project that encourages schools to buy from local farmers and offers student education about agriculture and nutrition
- Harvest Kitchen, a commercial kitchen that creates value-added products using inputs from area farms through a juvenile justice system job training program
- Farm to Food Pantry Grant supported food pantry purchases
Through their main food hub enterprise, FFRI supports these incredible programs operationally, but not financially. The economics make it almost impossible. In fact, most food hubs could not accomplish such a wide diversity of mission-oriented goals through the income generated on the transactional side of the business. This is because the margin structure of a food hub makes it incredibly challenging to support any activity that is not directly related to the buying, selling, handling and delivery of its core product or service.
A short course in gross margin
Consider this example: a food hub sells cases of goods at an average price of $10.00 and earns on average a 20% margin per case. In this scenario $8.00 is available to pay the farmer and any other variable expenses associated with moving that case. This leaves $2.00 to cover all of the overhead costs such as management salaries, rent and marketing. If this overhead totals $300,000 per year, the food hub has to reach $1,500,000 in sales just to break even on its core business.
Now, let’s say the food hub adds a nutrition education program that costs $30,000 per year. That hub would then need to generate another $150,000 in revenue (by selling an additional 15,000 cases) to generate the funds needed to cover this additional cost without any external support. For most food hubs, that is a big number.
Balancing profit and mission
Mission oriented food hubs struggle with similar challenges faced by all social enterprises – how to best balance financial profitability with the various areas of impact the hub is focused on. In our work with existing and emerging food hubs, the following mission-focused goals are often mentioned:
- Provide competitive, high prices to small, independent growers
- Support these growers in expanding their production by providing technical assistance services
- Promote sustainable agriculture by moving only organic products and/or supporting growers to move towards organic production
- Improve healthy food access by serving institutional customers, retail outlets in food deserts, offering low cost direct-to-consumer services, etc.
- Incorporate workforce development and job creation strategies
It is tempting to want to pursue all of these goals under a single enterprise, but this can often be incredibly challenging if not impossible. A food hub would find it difficult to pay farmers high prices while selling to those who have the lowest ability to pay. It is difficult to incorporate workforce development programs, which tend to lead to lower-efficiency labor costs, and serve institutional buyers who typically are the most price-sensitive. So it is critical that a food hub clarify and prioritize its goals. Then when difficult strategic decisions come up, the leadership team can assess the impact against various mission-oriented goals and more easily rationalize the hard tradeoffs that must be made.
Additionally, it is important for food hubs to explore innovative ways to enable mission-oriented elements of their business models to be funded. Some examples include:
- Accepting SNAP payments, and double bucks
- Grants and funding streams that subsidize labor as part of workforce development programs
- Incorporating a buy one, give one component – enabling higher-paying customers to subsidize lower-paying ones
- Redirecting seconds to programs focused on improving health equity
Finally, food hubs should consider – and honestly reflect on – when it makes most sense to operate as a nonprofit entity, for which grant funding is more readily available and financial independence is not necessarily the obvious end goal. This is a common approach for food hubs – almost 40% are nonprofits according to the 2015 NGFN food hub survey. Farm Fresh Rhode Island is a nonprofit, making it far more feasible to implement their broad range of programs to achieve its ambitious social mission: support Rhode Island producers, build healthier communities, expand healthy food access, improve the sustainability of the food supply chain and strengthen local businesses to grow a local food system that values the environment, health and quality of life of Rhode Island farmers and eaters.
“I wish we had this conversation years ago”
Food hubs are held up as beacons for solving the ills of the modern day food system, but their strength is limited by the resources they can muster, and the scale they can achieve. But even scale has its limits. Sysco, the world’s largest food distributor, nets less than 1% of sales.
After our session, the executive director of a food hub that has done incredibly valuable work in its community for more than 10 years, yet still strains toward breakeven, remarked how relieving it was to openly discuss this uphill battle. It made us wonder how many others are setting out to accomplish an unachievable set of goals, or where there are great examples of food hubs successfully doing the balancing act between profit and mission.
What is working and what is not working when it comes to food hub programs that support healthy food access? If you have an idea or stories to share, please let us know!