I’ve been covering the food distribution market over at Software Advice for the last year, and one thing that’s perplexed me is the insistence of U.S. food distributors to stick to a centralized approach to distribution. While a centralized approach to food distribution does offer economies of scale, it has negative impacts on the quality and freshness of our food. The continual reliance on this kind of distribution network is part of the reason that America eats more processed food than anywhere in the world as our food is prepped and packaged to travel an average of 5,000 miles before consumption.
Luckily, there are promising signs that the reliance on central distribution hubs may give way to local and regional distribution networks. Current trends such as the growing consumer demand for locally-grown organic food, a renewed interest in urban center living, and ever-rising gas prices may force distributors to change their networks.
I think we can get a good idea of how our distribution networks might evolve by looking to Europe, a place where these trends have advanced a few steps ahead of us.
The US Market for Organic Food is Rapidly Expanding
I think one of the most compelling arguments for weening off a centralized approach to food distribution is the explosive growth in demand for fresh, organic food. The organic food industry in the United States has grown from a mere $1 billion industry in 1990 to a more than $26 billion industry today. This kind of expansion of the market indicates a clear support for fresh, organic produce.
Meeting this burgeoning demand will be difficult, if not impossible, under a centralized approach to food distribution. What needs to happen in the U.S. is what’s been taking place in Europe for several years: local farms and farmers’ markets need to be supported. In the U.S., supporting big agri-business has been the status quo but these firms are not ideally suited to meet this demand. Recent trends, however, suggest local entities are willing to step up and fill this void.
Urban Centers Can Help Spur Regional Distribution
A group that appears much more able to meet this demand is the expanding community of urban agriculture and local farms. A recent study by the USDA found that urban farms account for roughly 15 percent of the world’s food. This food is grown in places such as vacant lots, rooftop gardens and other community-owned land. It’s hard to say how big this phenomenon is in the U.S., but there are urban farms popping up around the country such as Detroit, Michigan and Albuquerque, New Mexico. Speaking from personal experience, I’ve seen at least three urban farms spring up in Austin in the last year alone.
The proliferation of farmers’ markets is equally encouraging. The number of farmers markets grew by 17 percent in just the last year to hit a total of 7,175 official markets across the country. As these markets become more common–and urban farms multiply–it will become easier to serve regional food systems. The growth of urban farms and farmers’ markets also indicates that there is already an active community that’s ready and willing to endsore a regional approach to distribution.
Regional Distribution Better Suits High Gas Prices
Even if the cultural shifts we’re seeing in the U.S. were ignored, the new age of high gas prices is sufficient reason to restructure towards a regional approach to food distribution. High gas prices have been a fact of life in Europe for quite some time and as a result they’ve tended locate their distribution centers closer to the delivery point to limit transporatation expenses. By contrast, the U.S. has been spoiled with decades of cheap oil which has made it easy to ship high-volume loads from a centralized facility. With gas prices expected to continue their upward trajectory, this strategy simply won’t be economically viable a few years down the road.
If these trends continue on their current path, I believe that we’ll head toward a more European style of food distribution. But these are just my thoughts. What do you think? Please feel free to drop by Software Advice reviews site, and leave me a comment on my original post at: The Future of U.S. Food Distribution.