January 31, 2018; Civil Eats
In Philadelphia, the nonprofit Common Market now houses a 73,000-square-foot warehouse and office headquarters in North Philadelphia. It is also expanding nationally, having opened a satellite operation in Atlanta nearly two years ago. A Houston branch is expected to launch this spring. Chicago and South Florida are “next on the agenda,” reports Lisa Held for Civil Eats.
“We have aspirations for expanding to most of the major metropolitan areas in the United States,” says Haile Johnston, chief development officer. Johnston cofounded Common Market with Tatiana Garcia-Granados and Robert Pierson.
Common Market made its first delivery in June 2008, when enthusiasm about “food hubs” was first taking off. The US Department of Agriculture defines a 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.” Jeff Farbman, a senior program associate at the Wallace Center, explains that the idea behind a food hub is to create “what you might call a ‘benevolent middle man,’ who is both scale-appropriate for small and mid-size growers and scale-appropriate for large-scale buyers.”
“Food hubs,” notes Held, “have been surprisingly successful at overcoming considerable financial challenges to become viable businesses that support small and mid-size sustainable growers and get healthy fresh, food into varied environments, from Whole Foods to college dining halls to hospitals in underserved neighborhoods.”
As Held points out, while the phrase “food hub” is fairly new, local food distributors have been around for decades. Notable examples include Veritable Vegetable in San Francisco and Organically Grown Company in Oregon. Still, the 2015 National Food Hub Survey conducted by the National Good Food Network and Michigan State University’s Center for Regional Food Systems found that 82 percent of the hubs surveyed had started their operations within the past 10 years. The survey also found that the sector, though having thin margins, was reasonably healthy financially, with three-quarters of the hubs surveyed at break even or better.
Held adds that a USDA report released in November 2017 that examined food hub shutdowns nonetheless confirmed that the sector itself was strong, with roughly 360 active food hubs nationally, up from fewer than 50 in 2000. The report also noted a high five-year survival rate of 88 percent since 2005.
James Barnham, a USDA economist, observes, “There have been ups and downs. Some work, some didn’t work. There’s a lot of experimentation. But overall, [food hubs] have been very successful.”
As for Common Market, “In 2017, their team in the Mid-Atlantic distributed just over 2.2 million pounds of food to customers like Temple Hospital and 10 public schools in Strawberry Mansion. In Atlanta, the team distributed close to 400,000 pounds of food to places like Georgia Tech. Overall sales for the year were just under $5 million.”
Partnerships with anchor buyers have been key to Common Market’s success. “We recognized from the beginning that if this model was going to work, it needed to be at an appropriate degree of scale, and that scale was going to come through partnerships with places that make larger orders of food,” Johnston says. At first, this meant working with small institutions. As Common Market grew, relationships “with national companies like Aramark and Sodexo that manage the food service at large hospitals and universities” became critical.
“They’re the gatekeepers,” says Garcia-Granados. “At the end of the day, if you can’t navigate the food service management companies, there’s no way that you’re going to be able to open up the institutional market for the farmers.”
Capital has also been important. Held notes that Common Market used loans from RSF Social Finance, an impact investing firm, to buy their warehouses and truck fleet. RSF also provides a revolving line of credit, which enables Common Market to pay farmers within two weeks.
John Zimmerman owns a goat dairy, Kirchenberg Farm, in Pennsylvania and has sold his goat cheese to Common Market for about five years. Zimmerman says, “They pay fair prices and they take care of the marketing and logistics of it. It really works well.”
Common Market’s expansion efforts began three years ago. The work is complicated. Amanda Oborne, vice president of food and farms at Ecotrust, a group that opened its own food hub in Portland, Oregon, in 2016, notes that you can replicate warehousing and storage and distribution systems. But, adds Oborne, “There’s this very human, very magical element of producers and community coming together that can’t be replicated. It’s gotta grow up from that place.”
“In the end, scaling and replicating the Common Market model will really come down to how the company approaches each new region, as they work through what local food on a national scale means and the impact it could have—something that requires a lot more work than simple replication if it’s going to be successful,” Held concludes.—Steve Dubb