Food Distribution in America.

Via on Sep 18, 2012

Do you ever wonder where the apples you eat come from?

In New York City, a major apple growing state, chances are the apples you eat have traveled from hundreds of miles away. In fact, more than 75 percent of the apples a New Yorker purchases have been transported from the West Coast or from overseas.

To understand why your apple has traveled so far, you must look at the system of food distribution in America.

The conventional channel of food distribution starts with the producer, then moves on to a wholesaler, distributor or a combination of both. Next, it moves on to a retail store or a food service operator, and finally ends up with the consumer.

Often there are other steps in between the producer and the wholesaler, such as an agent or broker, whose job is to bring the wholesaler and the producer together. One company, based out of Houston, Texas, exemplifies this conventional system of food distribution.

Sysco is the world’s largest broad-line food distributor. A broad-line distributor services a wide variety of accounts with a wide variety of products. Sysco is a 225 billion dollar food business that services 400,000 customers, and employs 45,000 people in numerous locations across the United States, Canada and recently Ireland.

They offer over 400,000 products, including their own brand of products. While this business model is obviously successful, there are several issues this distribution structure presents, especially to small-scale and medium-sized farms.

 

The conventional channel of food distribution is run by a handful of companies, with Sysco capturing 17 percent of the market. Big corporations tend to do business with other big corporations, and big distribution companies tend to service big farms. This system of “corporate-consolidation” and “big business” sets the small-scale and medium-sized farms up for failure in several ways.

With each step added between the farm and the consumer, money is taken away from the farmer. Typically, farmers are paid 20 cents on the dollar. So even if the small-scale/medium sized farmer is able to work with big food distributors, they are typically not paid enough to survive.

If small-scale/medium farms are unable to work with the big food distributors, they must find alternative ways to distribute their food or take on distribution themselves. These farmers do not always have the capital needed, the know-how, or the time to do so. Low pay or inability to distribute their food efficiently often forces farmers to take an off-farm job.

The conventional channel of food distribution doesn’t just affect the farmer, but the consumer as well. The consumer literally pays the price of this system when they purchase food by encountering up to a 50 percent markup.

Recently, consumers have started to weigh the benefits of having year-long access to a variety of foods. Possibly a new conscientious consumer has emerged by considering the social, health, environmental, and economic implications of food distribution, brought on by the recent “big business” bailouts and failure in food safety.

This multifaceted view of the food distribution system has ignited the current, local food movement. Seeking to address these issues, regional food hubs have formed to offer small/medium farms an infrastructure appropriate for their scale, and satiate the consumers’ desire for local foods.

The USDA defines a regional food hub as, “A centrally located facility with a business management structure facilitating the aggregation, storage, processing, distribution, and/or marketing of locally/regionally produced food products.”

By providing a drop off and pick up point, and by managing the supply chain logistics, providing space and proper storage for both farmer and distributor, and offering assistance to the farmer seeking specific information or training/education, regional hubs are able to provide services that the larger distribution companies have not been able to.

 They also pay attention to where the food they are aggregating is coming from, focusing more on foods that are produced locally. Because a regional food hub is considering more than just the bottom line and efficiency, the way they are organized can vary from a typical corporate structure. They can be retail-driven, non-profit driven, mission-driven, producer-driven, consumer-driven and state-driven.

There are three types of regional food hubs: a shipping point market, a wholesale/terminal market, or a hybrid—a combination of the two. A shipping point market receives produce where they are cooled, graded, packaged, and marketed to larger wholesale distribution center and retail grocery stores.

A wholesale/terminal market receives produce in large quantities from around the world and sells to grocers, restaurants, and institutions. Located just a few miles from the urban bustle of Manhattan is an example of a hybrid regional food hub.

The Hunts Point Food Distribution Center (HPFDC) is the largest distribution center in the world. It is located in the Bronx on 329 acres and houses distributers, wholesalers and processing businesses. The largest tenants are The New York City Terminal Market, the Hunts Point Cooperative Market and the New Fulton Fish Market.

The HPFDC provides New York City’s metro area with 60 percent of its food and 20 percent of the region’s food, and reports over $2 billion in yearly sales. Combining direct and indirect employment, the Hunts Point Market provides 8,500 jobs for food businesses such as, grocers, bodegas, non-chain restaurants and institutions. While the HPFDC remains an important distribution center, it is currently facing a copious amount of issues.

Some of the issues the HPFDC is facing are an aging infrastructure and insufficient physical capacity, food safety concerns, environmental and air quality concerns, decrease in number of buyers, a reputation as “last resort” for produce, and a need for better management and operations.

The once state-of-the-art facilities are now 45 years old and the existing structure can no longer contain the business it takes in. For example, it has outgrown its cold-storage. To accommodate the need for more cold-storage, it keeps refrigerated trucks parked idling outside the buildings. This creates pollution and congestion in an area that already has poor air quality and an over-populated facility.

In fact, the community of Hunts Point Queens has one of the highest asthma rates in the world. Since the structures are full, not all of the food is properly stored. With the ever-evolving and increasing rigorous food safety guidelines, the HPFDC is unable to meet all the requirements.

Another problem the HPFDC faces is that over the years it has gained a reputation as a “last resort” for produce. While it does source high quality produce, it also accepts produce that other places have turned down. This, coupled with poor management, has contributed to the fact that the HPFDC has lost 40 percent of its buyers between the 2004-2008 fiscal years.Disappointed in HPFDC’s deteriorating services, buyers have sought out alternative distribution centers and have found one in Philadelphia, Pennsylvania.

The Common Market was started to address an issue that places like Sysco and the HPFDC do not necessarily take into account in their business model. Their premise is “that everybody deserves to eat good food and the people who grew the food deserved to be paid fairly.” This “market-oriented” approach keeps money in the local economy, supports local farms, and employs local people.

The CM connects wholesale customers to over 100 farmers in New Jersey, Pennsylvania and Delaware by marketing and distributing food to over 170 schools, hospitals, grocers and workplaces. Starting with one box truck and a small walk-in cooler in 2008, they sold over 100,000 dollars. This year, they are projected to sell over a million dollars. Even though this regional food hub model has been successful, like it’ predecessors, it faces some challenges.

Since the CM represents has only been around a short time, only time will tell if the CM’s model has enough internal expertise to make it a financially viable food distribution system. While the CM does currently offer an alternative to the larger distribution models, their mission limits what they can provide their customer. Even though they advertise that by using them, their customers will have, “one order, one delivery, and one bill,” this is not necessarily true.

Because their small size and limited operation, their customers will probably have to order from other wholesalers to provide what CM cannot. Similarly, because CM sources their food from places that are defined as local (200 miles or less from Philly) in the winter-time, their selection is curbed to greenhouse crops, storage crops such as apples, grains, canned goods, and meat.

While the conscientious consumer may be willing to do without some food sometimes, they may not be willing to sacrifice all out-of-season foods. As of now, a place like the CM cannot replace Sysco or HPFDC, but merely compliment and influence it.

When looking at each example, all three have similar structures; acting as a middle-man in between the farmer, the buyer, and ultimately the consumer. Their differences take shape with their motives and focus, whom they do business with, and how many steps there are in between the farmers and the consumer.

Sysco supports an old system of distribution focusing on efficiency and variety that mainly supports the retailer or food service operator. However, listening to the local movement, Sysco has recently begun to implement more sustainable practices and procure its food from more local farmers.

Looking at the HPFDC, they require not only re-building, but some rethinking to engage the community it resides in. The Common Market model follows a new system of local and sustainable that emphasizes equal support to the farmer and the buyer, but may have to find a way to grow and evolve while keeping its mission intact or find a way to collaborate with the more archaic systems. All three of these systems consider the consumer to varying degrees and could involve the community more.

The HPFDC and the Common Market are located in communities that are considered socially excluded. Social exclusion is a process that deprives individuals and families, usually in the form of neighborhoods, from resources required for successful participation in society as a whole.

This process is primarily a consequence of poverty and low income, but other factors such as discrimination, low educational attainment, and depleted environments also underpin it. These neighborhoods tend to experience higher crime rates, higher pollution, cutbacks in public services, and deteriorating buildings.

If these distribution companies and the communities worked together, they could make these neighborhoods safer and less isolated: an outcome that benefits everyone. Is it possible, however that there is an even better model of a regional food hub that has not yet been realized?

The three businesses, Sysco, HPFDC, and the CM provide a good foundation to build upon. A future regional food hub could move past the current models by combining private and public interest and offer farmer services and training, a food pantry, a grocery store, a farmers market, community health center, a planning committee with community representatives, a professional food production facility, a community kitchen and cooking classes, adequate parking and public transit, and an educational farm with training, apprenticeships, and volunteer days, a community garden, and of course…… an apple orchard.

 

 

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Editor: Nikki Di Virgilio

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About Monica Johnson

Monica is Co-Conspirator at Hudson Farms, located in far East, Texas. Monica is currently using 2014 to build the farm's soil and experiment, but looks forward to selling nutrient-dense fruits, vegetables and value-added products made from local ingredients in the Spring of 2015. When she's not farming she's probably in the kitchen cooking healthy meals, enjoying a glass of wine, or listening to the St. Louis Cardinals baseball broadcast. To connect with Monica visit http://monicajohnson.pressfolios.com, follow her on Twitter: @broccolimojo, or on Instagram: MonicaMarvels

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3 Responses to “Food Distribution in America.”

  1. susan says:

    such an important and overlooked aspect of our lives, thank you for this

    • Monica Johnson Monica Johnson says:

      Susan-
      So sorry for delay in response! Thank you for reading it and glad you found it informative!
      Monica

  2. Monica Johnson Monica Johnson says:

    So sorry for delay in response! Thank you for reading it and glad you found it informative!

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