By Don Shaffer
Social equity in the food supply chain was a strong thread running through the annual Sustainable Agriculture & Food Systems Funders forum this June in Denver. If we’re going to fix our broken food system so that it delivers healthy food to the whole population while enabling farmers to make a decent living, we’ll need new models and alternatives across the entire supply chain.
The most potentially transformative enterprises, however, often face the greatest funding hurdles. The forum’s theme, “Stronger Together,” reflects a growing recognition that collaborative funding strategies involving investors, foundations and communities are essential to getting these types of enterprises off the ground.
We know this approach can work. A growing number of social enterprises supported by what we call ‘integrated capital’ are successfully addressing problems related to food production, processing, aggregation and distribution in ways that contribute to social equity and agricultural sustainability. They’re flying under the media radar, but they’re worth examining as models for the field.
Real progress on tough challenges
Problems at the beginning of the supply chain — dwindling agricultural land, fewer farmers, lack of access to production facilities, and missing distribution links between metropolitan areas and their surrounding farms — are among the most difficult to solve. But several enterprises we’ve worked with in these areas have made real progress.
Viva Farms: Cultivating new farmers
In terms of food production, the biggest hurdles are affordable access to land near consumers and the need to encourage and train more people as farmers (the average age of farmers in the U.S. is 57). Viva Farms, an incubator program operating on 33 acres in Washington state’s Skagit Valley, addresses both issues, working with a mix of highly skilled migrant farm workers who have no access to land or capital and young, educated urbanites who have little agricultural experience. Viva Farms gives these new farmers training in sustainable farming practices, small land parcels with shared infrastructure and marketing support.
The goal is to transition the farmers from incubator to farm ownership with secure long-term prospects. Once farmers establish stable agricultural enterprises at the incubator, Viva Farms helps them relocate to new land and expand operations via a loan fund that provides affordable start-up and growth capital. Start-up costs for beginning farmers in the Valley can range from $30,000 to $500,000; with Viva Farms’ support, farmers’ costs drop to less than $5,000.
The program, launched in 2009, has provided training to about 250 people and launched 15 farm businesses that produce on more than 70 acres.
The primary challenges for the Viva Farms model are maintaining and expanding capital for land purchases and national immigration policy. Migrant farm workers who have the skills and desire to be the next generation of farmers often are hindered by their immigration status. Even if they personally have legal status, an immediate family member may not, and the ever-present possibility of deportation makes it difficult to invest for the long term.
Common Market: Restoring links to farmland
Tatiana Garcia-Granados and Haile Johnston created Philadelphia-based Common Market in 2008 when they realized they could address two pressing problems — threatened farmland and fresh food-deprived urban communities — by restoring the distribution link between Philadelphia and Delaware Valley farms that disappeared with the rise of global commodity agriculture. Their key insight was the value of cultivating institutional customers.
Supplying hospitals, schools and other high-volume buyers allows Common Market to give farms significant and immediate new income, and targeting institutions that serve a cross-section of the population allowed the enterprise to reach people who didn’t already have access to fresh food through farmers’ markets and high-end retail.
Common Market has grown rapidly, last year expanding to a new 73,000-square-foot facility and currently supplying 220 customers — institutional kitchens, retailers, restaurants and buying clubs — with produce, dairy and meat from more than 75 sustainably-run regional farms.The enterprise’s greatest challenges (both overcome) have been obtaining credit to address an inherent cash flow gap — institutions typically pay in 60 to 100 days, but farmers need to be paid in about 15 days — and growth financing for their new facility.
Regional Access: Collaboration for fair pricing
Ithaca, New York–based Regional Access was a social enterprise before the term existed, starting in 1989 with one truck; it’s now a multifaceted distribution and logistics company serving 600-plus regional and national grocery stores, restaurants, buying clubs, institutions and small natural-food stores throughout New York state.
Regional Access provides sustainably-farmed produce, grains, meats, dairy and prepared foods from more than 150 regional farms and small-scale producers. The company stands out for its collaborative work with producers on marketing, packaging and developing transparent value chains: pricing structures that get products to market at prices that are fair to everyone involved.
Regional Access has an aggressive growth strategy with an eye toward opening a satellite facility closer to key markets. The company is clear-eyed about the challenges it faces, however. Its intensive, long-term effort to assist producers and educate buyers increases overhead. At the same time, growing interest in good, local food has led to a proliferation of supply-chain businesses. Dana Stafford, president and general manager of Regional Access, believes continued success in a highly competitive marketplace will require partnerships with natural allies.
Several common themes in these successful models reveal essential elements in building an alternative food supply chain:
- An innovative mix of funding from a variety of funders. For example, Viva Farms was financed with a series of grants, loans and loan guarantees from RSF Social Finance, RiverStyx Foundation and the Seattle Impact Investor Fund. Common Market has tapped a similar mix of funding sources, with participation from the W.K. Kellogg Foundation, the Claneil Foundation and the 11th Hour Project, as well as RSF. Our loan to Regional Access for its new facility was made possible by a loan guarantee from the Park Foundation.
- Desire to create a model and a commitment to sharing knowledge. These attributes help spread effective practices and attract funders that want to drive social change and therefore are willing to go above and beyond to help the enterprise succeed.
- Attention to the needs of both farmers and consumers. You can’t force consumer markets; at the same time, approaches that serve consumer interests at the cost of farmers only exacerbate deep supply chain problems.
- Insight into food system breakdowns in the community. Resilient food systems are based on community needs, resources and knowledge. Even the best model has to be tailored for local circumstances.
Image credit: 1) Flickr/djjewelz 2) Courtesy of Regional Access
Don Shaffer is president and CEO of RSF Social Finance, a San Francisco–based organization that lends money to path-breaking social enterprises, provides impact investing vehicles accessible to a wide range of investors, manages grant funds and works to build a finance infrastructure that will allow social enterprises to thrive.