August 2020 Impact Assessment
About Wallace Center
The Wallace Center develops partnerships, pilots new ideas, and advances solutions to strengthen communities through resilient farming and food systems.
Impacts of COVID-19
- Positive: Huge increase in CSA/multi-farm box sales and other direct to consumer market channels, particularly with delivery. For hubs that already had these products and operations, it was relatively easy to ramp them up.
- New partnerships are emerging, particularly with the emergency food sector, local government, and the federal government through the Farmers to Families Box, which has kept a lot of hubs afloat and fed thousands of people in need with healthy, local food.
- Food hub networks are forming and strengthening which has led to better coordination between hubs and increased their ability to adapt to meet demand. Increased visibility for food hubs and local supply chains which increases public understanding and awareness.
- Food hubs are increasingly seen as critical players in supply chain resiliency and emergency food response.
- Negative: Near complete collapse in major, reliable market channels like restaurants and schools which led to a realignment of how hubs are run—had to switch to pre-packed, family sized orders compared to bulk or wholesale. Hubs that couldn’t pivot to direct to consumer or retail are failing. (According to the 2017 Food Hub Survey, 76% of hubs sold to restaurants while only 23% sold to supermarket chains) Financial uncertainty both in terms of sales and revenue, government assistance, and grants and donations. Will any of these changes last?
Obstacles to Sector Response
The biggest obstacle has been the massive, nearly instantaneous swing in demand from schools, universities, and restaurants to direct to consumer, retail, and online. Realigning supply chains to meet different kinds of demand quickly has been the biggest challenge for hubs because it required different types of labor, different relationships, different infrastructure, and heightened safety measures to limit staff and customer exposure to COVID. For hubs that source meat, bottlenecks in processing have been a huge barrier to keeping products moving through their hubs. Challenges in wanting to serve their communities and provide food to people in need, but also maintain their margins and support farmers who are also struggling. This requires extra fundraising and labor.
Successful Marketing Adaptations in Response to COVID-19
- Hubs that had existing direct to consumer programs were able to expand them to cover (or exceed) the losses from other market channels. Hubs developed new direct marketing programs or quickly implemented new systems to increase accessibility to existing direct market programs. Implementation of and improvements to online ordering are examples as are home delivery and drive-up/curbside pickup.
- Hubs have created novel relationships with the emergency food system, through USDA Farmers to Families Box program and other federal programs, new partnerships with food banks (often funded through philanthropic donations), or other partnerships with local governments.
- Hubs working together has been a longstanding practice, but those ties and business relationships have intensified and deepened to better align supply and demand across larger geographies.
Economic Impact on Sector
The economic impact on hubs has been wide ranging—some hubs that run direct to consumer programs, or have created them, are seeing higher demand than ever. Some hubs that have had to pivot to this kind of market channel have seen new revenue streams cover their losses from other channels like restaurants. Many have had to spend a lot of money to build up these market channels, both in the form of infrastructure like new freezer space and truck rentals, equipment to process or cook food to meet consumer demand, or in hiring new labor that can pack and deliver individual boxes rather than pallets. It’s hard to say that the sector at large has experienced growth or loss because it widely varies from hub to hub based on their previous market channels and infrastructure and the particular way that demand changed in their region. We’ve heard anecdotes about revenue increasing and profitability decreasing because of additional costs associated with initiating new market channels (eg hiring more labor, leasing trucks or freezer space), or hubs taking losses because they want to serve their communities. Would love more data here. Financial uncertainty for hubs that have hired new people and bought new equipment to deal with increased demand without any indication of if the demand will last, either due to funding (USDA CFAP, short term grants and donations) or consumer behavior (will people keep their CSA/multi-farm box subscriptions?)
Impact on Sector Members
We know across the board that the health and economic impacts of COVID are having an outweighed negative effect on BIPOC (Black, Indigenous and People of Color) individuals, communities, and businesses. It would be great to have the means to do an analysis to learn about the impacts by demographic, and bring BIPOC leaders into the conversation, center their stories, and compensate them for their time.
Desired Data and Technical Assistance
Data:
We have solid pre-COVID data on food hubs through the Food Hub Survey (conducted by MSU and the Wallace Center in 2013, 2015, 2017, and 2019) and the Food Hub Financial Benchmarking study (conducted by Wallace and Farm Credit East in 2016 and 2018). There is not currently funding for 2020/2021 for these studies. National data on performance, operational, and financial metrics for hubs during and post-COVID will be critical for capturing the impacts of COVID on this sector, identifying promising marketing channels, and supporting data-driven decision making at the enterprise and sector levels. Currently, our understanding of the sector is based on anecdotes, not real data. Understanding the full impact across the sector will require research on par with the Food Hub Survey and Food Hub Financial Benchmarking Study.
We have some information about which hubs have benefited from government programs like the Farmers to Families Food Box Program. What about other federal relief programs like PPP, EIDL and FEMA disaster recovery funding? It would be great to be able to get a better, more holistic sense of the impacts – for better or worse – both in the sense of keeping critical aggregation and distribution businesses in business and in terms of addressing food insecurity at the household and community levels. This would benefit food systems audiences to learn about innovations and models, and also to policy audiences at the state and local level who aren’t familiar with food systems but are looking for ways to infuse resiliency into their economy and community. It would also be significant to learn about other public funding sources that supported local food systems and emergency food relief. There have been a few anecdotes shared but there’s definitely a lot of these instances that we haven’t learned about.
Technical Assistance:
- Tools for transitioning to online
- Direct to consumer ordering systems
- Training on cash flow and fundraising (attracting grants and donations) for hubs that rely mostly on sales rather than grants
- Technical assistance on USDA GAP certification (and GroupGAP) for growers and hubs to allow them to access federal procurement programs such as the Farmers to Families Food Box
Additional Information
Local produce is seasonal. Year-round operation has always been a challenge and that in this case COVID disruptions began before most local seasons began and that this allowed some time for re-thinking but was too late for changes to production plans for this season. Anecdotal evidence that longer season operations have increased plantings by the theory that “more people need local food.” Time will tell what fall and winter bring.
Contact Information for Wallace Center:
Ellie Bomstein ellie.bomstein@winrock.org
