It’s no longer just a chef’s challenge to write a menu with kimchi and kale; it’s now the farmer’s job to grow what the consumers are demanding, which often means, re-thinking the system they’ve long worked within.Suddenly, the goal for restaurateurs and food entrepreneurs is not to supply food that’s cheap and chock full of sugar, salt, and fat. Instead, they’re challenged to supply customers with organic, fair trade, vegan, gluten-free, and just plain nutritious foods at a price point that’s manageable. And it turns out that’s not what the food supply chain is set up for. Slowly but surely, Millennial demands are putting pressure on an archaic food system set in its ways.
“The Millennial consumer and head of household is changing the landscape of our food industry,” says Laura Batcha, CEO and Executive Director of the OTA. “Our survey shows that Millennial parents seek out organic because they are more aware of the benefits of organic, that they place a greater value on knowing how their food was grown and produced, and that they are deeply committed to supporting a food system that sustains and nurtures the environment.” Ultimately, it’s a completely new set of evaluations when it comes to what we eat, a significant shift away from the last few decades of buyers flockin to frozen and sometimes indestructible packaged goods pandered as the ultimate, cheap convenience.
The U.S. organic market posted record sales in 2015, skyrocketing to $43.3 billion, up 11 percent from 2014. Globally, organic, functional, allergen-free and better-for-you foods sales just might reach $1 trillion in 2017 , according to Euromonitor International. Havas anticipates the gluten-free market to grow 68 percent in the next five years, Paleo to grow 364 percent, vegetarian and vegan markets to grow 86 percent and raw to grow 101 percent. Food is the new social currency, and beyond that, now viewed as a mechanism for managing personal and planetary health. People are placing their food dollars where their personal values are.
Yet, “a majority of American farmland is dominated by industrial agriculture—the system of chemically intensive food production developed in the decades after World War II, featuring enormous single-crop farms and animal production facilities,” states Union of Concerned Scientists. Corn, soybeans, wheat, and hay account for 85 percent of the nation’s farmable land—not the organic greens, berries and legumes these young eaters have a hankering for. Interest in local, sustainable, and organic products far exceeds the available supply. Imports of organics are up to compensate for the difference. Of course, prices on these items are also high, as the basic model of supply/demand economics plays out.
Today, food entrepreneurs looking for organic, traceable, sustainable goods are left, in large part, to their own devices, unable to source their ingredients through the same supply chains that bigger food manufacturers draw from. They’re looking beyond the current supply chain to create a new map of sourcing, distributing and selling the goods demanded by their food-loving and food-educated customers.
One solution exemplified by several successful food startups is to go directly to farmers. Dig Inn, an organic, veggie-focused fast food restaurant chain works with farms of varying sizes—from as small as 10 acres to as large as 500 acres—around the country to supply the local, sustainably grown produce. “We serve seasonal American food, mostly vegetables, from farmers and partners as close to home as possible,” the company website reads. “We’re disrupting the food system,” they state, by working directly with farmers and producers that align with their values and mission. Blue Apron is another startup that goes direct to farmers, along with Sweetgreen.
Even the big guys are rewriting the rules. Dannon, one of the largest yogurt companies on Earth, has had to create their own supply chain for the release of non-GMO yogurts in the U.S., unable to source directly from their usual marketplace, instead forging relationships directly with dairy farmers. Costcohas opened its own chicken farms, to ensure antibiotic-free, cage-free birds. “The move is part of Costco’s plan to have more control over its own supply chain,” writes Lucinda Shen for Fortune.
Shen’s observation points to another area of tension, beyond supply: traceability, transparency, and control. Transparency—an offering the food and beverage trend firm Hartman Group notes as “paramount” when appealing to Millennial buyers—in the current system, where ingredients can bounce along a chain from farmer to manufacturer to distributor to retailer, sometimes with additional steps in between, is often a near-impossible task. (This has been proven by stories of horse meat, pink slime, pork bung, glass, e coli and other contaminants or unexpected ingredients that are difficult to track back to their sources).
Working directly with farmers allows for greater clarity on when an item is being harvested, from what kind of soil, by whom, how it’s cleaned and packaged and delivered. It also provides the opportunity for collaboration.
Boomers vs. millennials: Mind the food generation gap
“Ultimately, our business is well positioned to support farmers,” Adam Eskin, founder and CEO of Dig Inn told me, “as we both benefit from a relationship that is tight-knit, with constant communication—a true partnership. Rather than cut in and out during a growing season, we support crops in their entirety, which means farmers can predict sales and be profitable off their land. Going direct to farmers improves the flavor, quality, and performance of our food. We also have the added bonus of being able to chat with a grower, make changes, and implement within a few days from harvest. The current conventional system is ill-equipped to be as hyper-responsive as we can be."
These direct-to-farmer relationships also provide a cost benefit to the retailer and farmer, as they essentially nix the middle men. A 2011 study done by the United States Department of Agriculture Economic Research Service shows only 11.6 percent of the dollar goes back to the farmer, with food distributors and processing taking most of the profit. “Price is still a major barrier,” says Nick Green, co-CEO of Thrive Market, of getting organic, sustainable goods to their customers. Think of Thrive Market as Whole Foods meets Costco: “Buy healthy food from top-selling, organic brands at wholesale prices. Shop for gluten-free, non-GMO, non-toxic products for a wide range of diets,” their company tagline boasts. “To make Thrive’s products accessible, we need to get natural and organic products at or below the price of the conventional equivalent. And sometimes we’re able to do that, but sometimes we haven’t been able to,” says Green.
To maneuver their way around the price issues, Thrive Market has begun to launch their own products. “If there’s a product that we’re not able to get at a price that’s affordable to people,” explains Gunnar Lovelace, Thrive Market’s founder, “we’ll go up the supply chain, work directly with a supplier or co-packer and do Thrive Market branded coconut oil, for example. We can get products for 50 percent off what you’d usually pay for the conventional equivalent.” Thrive Market’s system cuts the distributors and processors out of the equation.
“The big challenge is we’re dealing with an archaic distribution system,” notes Lovelace. “We’ve got the farmer, transportation, manufacturer, distributor, broker, retailer. It’s a super obsolete 20th-century distribution model.” To solve for it, Thrive Market is “completely disintermediating the supply chain, and vertically integrating and collapsing that pricing in a way that allows us to pass along savings to our members,” Lovelace states. This model works in additional security and income for the farmer, on top of Thrive Market’s own savings and elevated product offerings.
Small farmers—like those idyllic images you often see of the young, organic, fair trade farmer in the Hudson Valley or hills of Vermont—are often separated from the conventional supply chain. They can find it difficult to find labor, transportation and distribution networks that support local, seasonal farming. Direct-to-farmer relationships provide stability to those who are practicing sustainable farming methods. But the buyers need to be willing to bend to nature's whim and see the benefits of investing in sustainable agriculture, instead of efficient and cheap agriculture.
“We’re proud of the partnership we have with Dannon,” says Ken McCarty of McCarty Family Farms, a farmer partner with Dannon since 2011. “It’s uncommon in the dairy industry to have such a close working relationship with a milk buyer. Not only does it give us reliability in the market, it gives us reliability for our families and our community. And it encourages all of Dannon’s farmer partners to convert to practices that better serve our natural resources and environment.”
Thrive Market, Dig Inn and Sweetgreen are all also vocal about the reduction in food waste, greater diversity in crop selection, the reduction of produce's carbon footprint and water use that all accompany this farmer-retailer relationship.
Slowly, these changes are pushing the supply chain to think more critically about their measures of “success.” Is it really just quantity, or should quality—nutrition, freshness, sustainability—start to become a part of the equation?
“If we don’t change the way that food is packaged or produced or distributed or marketed—just to be stark about it—we’re going to be in serious trouble as a species,” Lovelace clearly outlines, as he discusses the sustainability shortcomings of today’s agriculture system.
The only question remains: When are those who are driving the traditional supply chain going to look up and take note?
