Wednesday, June 28, 2017

Changes in the Marketplace: Where Do We Fit?
By Farmer Richard de Wilde

Many of you will have heard by now that Amazon has bid $13.7 billion to buy Whole Foods Market (WFM).  Within the industry and news in general, this deal has put quite the focus on the future of food buying and many are speculating about how this will change the face of grocery retail, specifically related to perishables.  Only time will tell just what is in store for consumers and producers like us.  Some of you may be wondering why we are even writing about this business deal?  Well, Harmony Valley Farm has been growing produce for WFM stores in the Midwest region for over 25 years.  We have a long and mutually beneficial relationship with them, so we are concerned about the impact this buy out will have on our farm. 

WFM purchases large quantities of selected vegetables we agree to grow for them based on preseason commitments and negotiated pricing.  They have had remarkable follow through and they stay true to their commitments throughout the season.  They are reliable, consistent, and they pick-up at our farm twice per week.  The trucks that deliver product from the distribution center outside of Chicago to their stores in the Twin Cities are mostly empty on their return trip, so they stop and pick up produce at our farm and other regional farms as a back haul.  Their consistent volume purchases have allowed us to obtain efficiencies of production we do not have with small volume orders.  If we have a large amount of a crop available in excess of commitments and we need help finding a home for it, they have stepped up to the plate and helped us out so product doesn’t go to waste.  Our CSA members do benefit, unknowingly, from these efficiencies.  For example some crops, such as celeriac, would be very inefficient for us to produce for only a few CSA boxes and a few pounds for farmer’s market and local wholesale accounts.  We are able to plant a larger quantity that will meet our commitments to WFM and leave plenty to supply our CSA boxes and smaller volumes for other accounts.

WFM has eleven regional buying centers across the country.  This allows them to buy and offer local foods in any given region!  That is considered a very inefficient system by the mega players.  If Amazon chooses to establish a national buying center to replace the regional centers, we may not be able to compete with the mega-farms.  If that’s the way things go, what will happen to the local products?  Will anyone ask where things are coming from or how they are being produced?  

One of the strategies we’ve chosen to employ on our farm is building diversified markets.  We grow vegetables for wholesale distributors, retail outlets, restaurants, etc.  A small percentage of what we grow is for our farmer’s market customers.  Of course, we also grow crops for you, our CSA members.  Over the past few years we’ve shared with you our concerns about the trend in declining CSA membership, both within our own membership as well as CSAs across the country.  When we saw our CSA shares trending down, we were able to increase our sales in other parts of our business.  WFM was our largest account to respond to this shift and our sales to them increased significantly, allowing us to maintain our production and keep our business stable.  WFM is not the largest player in the produce ring, but they have been a stable revenue source for our farm for many years!  Yes, we do wonder, will that change with this buy out?  At this point, honestly we don’t know.  What generally happens with similar buy outs, involving big players in a competitive market, is workers and suppliers get squeezed to lower costs and increase profits.  We are not willing to squeeze our good employees and/or compromise the integrity of our business to accommodate a corporate buy out!  Of the many articles circulating in the news, little is being said about the impact this buy out may have on the many mid-sized organic farms WFM has nurtured for so many years. 

Our farm has been doing fine and, despite significant crop losses last fall due to weather, we are back in the game this year.  But we certainly realize the game is changing and knew this even before Amazon’s buy out of WFM.  This situation actually brings a conversation to the forefront that has been brewing for years.  What is the future of food buying?  What do consumers want, and how will these needs and wants be met?  In the case of the WFM buy out, just what will WFM customers get out of this? Maybe they will benefit from a more convenient shopping experience.  They can walk-in with a list, place their order and the groceries will be packed while the customer enjoys lunch at the deli.  Or better yet, order on-line and have your groceries delivered to your door!  What do consumers value and what will they vote for with their food purchases?  Folks, please realize your food choices as consumers directly impact the future of our farm and our food system as a whole.   Ultimately, our future and the future of our food industry is in your hands.  

Back in February, we had the opportunity to meet with most of the produce buyers we do business with, including one I have been working with for over 40 years.  This guy not only knows the ins and outs of the wholesale produce world, but he also desires to do the right thing and does his part through his purchasing to build connections with growers and pay a fair price for the produce he’s sourcing.  In the course of our conversation we discussed some of the elements of the “darker” side of the produce world.  He made a comment that whenever you see a low price in produce, you have to assume that at some point along the supply chain, someone was exploited.  But is that something anyone considers when they just got “a good deal?”  I don’t want to focus on the negative side of the produce industry, rather I’d like to reinforce the idea that there are many models of producing food.  The demand for organic food in the marketplace continues to grow, and along with it the supply must also grow.  In many ways, this is a good thing regardless of the size of the farm or company producing food.  Any land that is managed by certified organic standards is land that is not being treated with harmful chemicals, planted to genetically modified crops, etc.  However, please realize that an organic certificate does not encompass all of the aspects related to producing food in a way that is beneficial for communities, local economies, the environment, workers involved in food production and more.  Yes, these are all factors that play into the bottom line.  Again it is up to the customer to decide what kind of agriculture and distribution systems we want to build and support. 

We know first-hand there is a benefit to forming a connection with those who produce your food.  We appreciate transparency in our own food both as eaters as well as producers!  We place great value on delivering fresh, nutrient dense food that tastes good, but there are so many other parts to this story.  Will convenience and low prices supersede the value and recognition needed to address and care for these other issues?  What about worker welfare, building a healthy ecosystem, supporting pollinator populations, building a strong food safety program, providing a place for your children to learn about and experience first-hand where their food comes from.  Aren’t these things also important? 

We have lost CSA and farmers’ market customers over the past few years for a variety of reasons.  We are confident that we are the best growers in the Midwest and are always striving to make improvements so we can do what we do, just better!  Will this be enough to stay in the game, or will the industrial food system win?  In future newsletters this year, we will go into more detail about some of these issues including the following:
  • Do consumers value local production?  Do they want to know and develop trust with the growers producing their food? 
  • Is their transparency between the producer and the consumer?  For example, is it clear how they pay and treat workers?
  • How important is it to be certified organic, with verification by an independent third party?
  • Will we have to do door-to-door delivery to keep our customers?
  • Where does freshness and nutrition of local produce come into play?  Does it matter?
  • Is it important for consumers to connect with local producers and have an opportunity to actually visit the farm, camp, tour, learn, let kids eat vegetables straight from the field?  This is a unique attribute Amazon probably can’t offer!
  • Is anyone concerned about conservation of water, birds, bats and bees?  WFM tried to include that in a complicated evaluation process for producers to help guide their purchases and support growers who go above and beyond to support some of these other aspects of agriculture.  We scored the “best” rating in their system, but will this rating mean anything once Amazon enters into the picture? 
We welcome your thoughts and would like you to be part of this ongoing conversation as we examine our place and the place of other local producers in the “future of food” that meets your needs and desires.

For another take by a food pioneer we respect and admire greatly, read:

1 comment:

Peter D. said...

My family has been a Harmony Valley CSA members for 9 years. We had no idea about the amount of business HVF does with Whole Foods. This article was enlightening and raised many good questions about the future - which we have no answers to right now. I think it also underscored for us the importance of our CSA and Coops as the focal points for healthy, sustainable food.

We look forward to the future articles that Richard alluded to at the end of the piece.