Aligned business models financed by patient investors are creating robust local food infrastructures.
Even as companies become increasingly global, a reverse trend is happening that is worth paying attention to. In an intriguing feature story in Madison, Wisconsin’s alternative newspaper, The Isthmus, journalist Phil Busse argues that Madison is at the forefront of a revolutionary approach to agriculture – Slow Money, an offshoot of the local food movement, that holds the potential to disrupt the food industry.
Revolutionary suggests something outside normal business. Actually, it’s business at its best. Slow Money is an innovative business model ecosystem for building local employment, reducing carbon footprints and enhancing the nutritional value of locally available food.
Back to the story – A small group of Southeastern Wisconsin agricultural innovators are seeking to build a more robust growing and food-processing infrastructure. The problem they aim to solve is the fact that the average American meal is estimated to travel 1500 miles before landing on the family’s dinner plates. Slow Money’s solution is to keep raw food products in a region for processing by creating new firms that add either processing or growing capacity.
New additions to the region’s food sector infrastructure will be financed by investors who do not measure return solely in financial terms. The Slow Money movement, as these investors are called, has a goal that is “nothing if not ambitious: to radically shift how we invest our money, what food we eat and how we support our communities,” according to Busse. The Slow Money movement has chapters in some of America’s magnets for young people like Austin, Seattle and now Madison, Wisconsin. It’s aim is for one-million people to spend 1% of their paychecks buying from local food companies.
Please note: I am not writing about a 1960’s hippy-movement on the sidelines of the economy. I am writing about a potential transformation of the food industry that will place the processed food companies in between lowest-priced mass market store brands and really healthy, truly local food offering the most nutrition, least carbon impact and most local employment. I, for one, would not want to be a marketing manager caught in the middle. According to Busse, “Business Week called it (slow money) a ‘big idea for 2010,’ and Time Magazine asked whether ‘slow investing’ could ‘remake America’s food system’.”
An example of the kind of investment the Slow Money movement will advance is Black Earth Meats. This Southeastern Wisconsin organic meat processing company adds value to the local ranchers supplying many of Madison’s higher end restaurants. “Without Black Earth Meats, it is likely that small-scale ranching would vanish from southern Wisconsin in the near future,” writes Busse. Black Earth Meats makes the overall food system more efficient as ranchers now specialize in ranching while Black Earth Meats specializes in butchering; together they provide restaurants with better quality at lower prices than if ranchers tried to both ranch and butcher.
Milk processing is an area where I’d like to see more local production. It makes no sense that Wisconsin ships bulk milk outside our state, only to have it return to be sold. This kind of light manufacturing would advance needed manufacturing employment opportunities. A Badger milk brand – good for the environment and good for local employment – would be worth a price premium to a growing set of consumers. Proactive economic development groups will think more and more along these lines.
Economic theory advises regions to specialize production as open economies with trading between specialized regions are the best for meeting society’s needs. The theoretical conclusion assumes that prices reflect true costs. In the real world, prices rarely take into account what economists call externalities, e.g., the environmental costs of transit or the increasing value of jobs to a community. In these cases, the predictions of theory should be ignored.
A new group of consumers and investors is incorporating an understanding of externalities into their purchasing and investing decisions. This change holds the opportunity and risk of market transformation, even if the environmental impact of transportation is never reflected in prices through a carbon tax.
If transportation is a key part of your industry’s ecosystem, starting thinking strategically about how your industry might change. Business model innovation opportunities exist in more than food.
The economic feasibility study is required in any field; as it is anyhow financial issue. To have good knowledge of current economy it is necessary to know the history.
Kay, this article strike near to home for us here in Ottawa, Canada.
In the last couple of years we have seen a steady growth in local farmers’ markets – based on the 100km radius rule. The largest of the markets, and the most successful is now being threatened by the city who want to develop the land area where the market is housed and bring in Whole Foods. Now the Ottawa market is nowhere as big or as vital as a lot of the city markets we saw in Europe last year, but it is a great start to getting there. They have had steady growth and expansion and there is fast growing community around market day.
The city, in brining in the major chain in direct competition with the farmers market, sees they will make more in tax revenues. The fear is that move will kill off the market, still in its early growth stage, or Whole Foods will simply require the market to be gone so there is no direct competition to their store.
So our enlightened city leadership are running in the opposite direction to all the benefits you have identified in your article.
There are multiple situations for buying local foods:
* I am free to go to the market
* I want to support farmers the best I can
* Wow, a fun Saturday AM event
* I’m having a dinner party and Whole Foods offers the freshest stuff
* Etc.
In our community farmers markets and Whole Foods are not in competition and in fact, the growth of farms because of our robust farmers market network has created an ecosystem that allows Whole Foods and other grocers to offer more local foods, differentiating their stores from the Walmart-type competition.
Your city leaders are not thinking about ecosystems, critical to economic development.
Kay,
This is an excellent post! It strikes a chord with me because I’ve spent two years in the local foods sphere–first because of an action learning project in which I was involved at my graduate program at Northwestern University in 2009 and second because as a result of that experience, I’m now a true believer in the impact that developing a local foods ecosystem can have on a regions economic development.
In our research, we discovered that in Illinois, of the $48B spent by consumers on food each year, nearly all of the money leaves the state. In 2009, IL launched a task force, “The Illinois Food, Farms, and Jobs Coalition” to investigate these market dynamics. They set a target: “20-by-20,” as in 20% of food procured by the state of IL (in schools, government offices, prisons, etc) should procured locally by 2020. They were very keen in acknowledging that local=regional, such that partnering with the surrounding states is encouraged. As a part of that coalition, my masters program was engaged to help them approach this problem through the lens of strategic change management theory.
(here’s a link to the 2009 Illinois Legislature’s Report, http://www.foodfarmsjobs.org)
My team took a very innovative approach to the problem of local foods in –we decided to write a children’s book targeting K-3rd graders to teach them about the value of eating local foods. The book was a smash and it is being used in many IL schools, disseminated via the internet as an e-book as well as through a partnership with a non-profit called Seven Generations Ahead, in Oak Park, IL. Our hope was that in creating education around the importance of eating local foods, that we would teach children and their parents and teachers about the impact this behavior could have on their community. I’ve attached a link to the e-book below:
http://slidesha.re/PercyPerkinsStoryonSlideShare
Illinois is making big strides in developing the business case for a local foods distribution network based on three impact measures:
1) Food security in the face of bioterrorism risks and threats to the global supply chain
2) The impact that education and discussion around local foods can have on public health
3) The impact that creating a local foods ecosystem can have on the local economy (especially via the money multiplier)
Your neck of the woods is no slouch, either. In a separate but related consulting engagement with the Illinois Farm-to-School network, I was often on the phone with Sara Tedeschi, at UW-Madison. The folks at UW-Madison are working their tails off to spearhead an integrated food delivery network by using GIS-mapping to develop “food sheds” and “school sheds,” and most importantly in building bridges between local/regional farmers and their consumers (restaurants/grocers/farmers markets). The biggest problems: incentivizing farmers to grow diverse crops (vs. Corn/Soy/Sugar beet/Wheat monocultures) and distribution: how will you connect local farmers with consumers without an efficient mode of transporting the goods.
As with most problems, the solutions reflect deep systemic causes. But the bright side is that those three impact measures I listed above–homeland/food security, local economic development, and public health–these stakeholders are beginning to see themselves as members of the same ecosystem. Let’s only hope that we can continue to make the business case state-by-state, region-by-region. The solution doesn’t lie in legislation alone–it must come from a market realignment.
One solution that I was directly involved with was the establishment of the Illinois Farm-to-School Alliance. The key breakthrough in this consulting project was the “re”-discovery of the Univ. of IL Extension Office as a vehicle for delivering the local foods message to farmers. Almost all states with land-grant universities has an Extension Office, and we discovered that these folks have the longest standing relationships with (mostly skeptical) farmers. In IL, the goal is to use the extension network keep farmers (particularly independent family farmers) engaged as stakeholders.
Attached below are some write-ups on my graduate program’s contribution to this burgeoning movement.
http://bit.ly/g4nmIx
and
http://bit.ly/h1XcAa
I am so happy to see you supporting this movement. We are in the midst of a zeitgeist when it comes to local foods. Looking forward to seeing more posts (pardon if I submitted this post twice).
Rashaun your comments are so inspiring and informative. Thank you. There is a way to connect growers to buyers (individual and institutional) called Local Dirt, started by a remarkable entrepreneur Heather Hillerin who worked for years at Whole Foods before doing an MBA at the University of Wisconsin Madison School of Business, Weinert Center for Entrepreneurship. Look at this firm and I can put you in contact with her if you wish.
http://www.localdirt.com
twitter.com/LocalDirt
facebook.com/LocalDirt