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Entrepreneurship Through Local Food Systems

2011 Wisconsin Conference on Downtown RevitalizationThursday October 20, 2011Fond du Lac, Wisconsin

Photo credits:Left: Deering Oaks Farmers Market by Corey TempletonMiddle: Le Cordon Bleu Ottawa Culinary Arts Institute" by Ottawa TourismRight: Michael Pollan at UBC Farm-In Defense of Food-IMG_3043 by Roland Tanglao

The Wisconsin Local food EconomyLaura Brown, UW-Extension Center for Community and Economic Development

A Retail Perspective on Food EntrepreneurshipMichelle Schry, General Manager, Peoples Food Co-op

The Role of Business Incubators, Mary Pat Carlson, Executive Director, Farm Market Kitchen

Todays PresentationBefore we get started wed like to find out who you are. How many of you are main street coordinators? Work on economic development in other ways? Local elected officials? Farmers? Eaters?2Learn how food production systems, incubators, coops and local eateries can take root downtown and create new entrepreneurial opportunities. Also learn how these ventures support the local food economy, encourage local healthy living, and attract culinary tourism dollars.

Todays Presentation3What is local?What is local? No formal definitionsMay be based on geography or socio-political boundaries (i.e. county lines)Foodshed - A foodshed is everything between where a food is produced and where a food is consumed.2008 Farm Act- A locally or regionally produced agricultural food product is less than 400 miles from its origin, or within the state in which it was produced.

Lets start by clarifying what were talking about today. While there are no formal definitions of local we can think of a food system or a local food system as a food shed. A food shed encompasses everything including and between where food is produced and where it is consumed. There are more formal definitions of local foods which typically define it based on geographical origin or distance. 4

YIKES!Who is involved?Producers and other entrepreneursHigher prices, direct feedback, consumer support, social connections, support for local economyConsumersFreshness, nutrition, safety, appearance & taste, connection to food sourceCommunitiesLocal economy, community building, health and wellness, maintaining rural character, ecological health (soil, water, habitat, biodiversity) (http://www.entrepreneur.com/article/220357 )

The global food system is complicated so for the purposes of our presentation were going to consider the interests of consumers those who are driving the push for local, regional, and seasonal foods, producers, and communities. Research from USDA and local research here in Wisconsin shows that consumers who are purchasing local foods are most interested in freshness, nutrition, food safety, appearance, and connection to the course of their foods. Producers are increasingly stepping in to meet this demand and these are not all rural traditional farm businesses. These include a growing number of small, lifestyle farms, as well as urban farming projects, value added production- entrepreneurs that produce food products or businesses that serve processing needs.Communities (or community organizations) can become involved in these efforts for a number of reasons. Many communities or local organizations have been motivated to become involved in local food systems by an interest in community health, including obesity or type II diabetes prevention. Communities may also see opportunities to grow the local economy by supporting producers and small businesses through things like kitchen incubators and farmers markets. Lets take a closer look at how food systems might be related to economic development. 6Local foods account for a small but growing share of total US agricultural salesProduction of locally marketed foods is more likely to occur on small farms in or near metro countiesConsumers who value high quality foods produced with low environmental impact are willing to pay more for locally produced foodFederal, State, and local government programs increasingly support local food systemsAs of 2010 there were few studies on the impact of local food on economic development, health, or environmental quality.

According to a USDA literature review Martinez, Steve. et al. Local Food Systems Concepts, Impacts, and Issues. ERR, 97, USDA. Economic Research Service, May 2010

7The Big PictureHow do we typically measure the economy?Jobs * Income (Labor as well as total income) * Industry Sales

Sources of data

United States Department of Agriculture Agricultural Resource Management Surveyhttp://www.ers.usda.gov/Data/ARMS/ NASS Agricultural Census Datahttp://www.agcensus.usda.gov/

Economic Development- Process of retaining, expanding, and attracting jobs, income and wealth in a manner that improves individual economic opportunities and the quality of human life.In order to understand how and if local food systems are related to economic development well take a look at what's actually happening in the economy. While the purpose of economic development may be to improve indivdual eocnomic opportunity and the quality of human life, these can be difficult things to measure. So, more typically we use things like JOBS, LABOR, and INDUSTRY SALES.8The Big Picture

Slide courtesy Steve Deller, Department of Agricultural and Applied Economics, UW Madison.Extension. The Role of Agriculture in the Wisconsin Economy. Presented October 2011.This is a graph of growth indices for Total Employment compared to three measures of the food and agricultural economy. What you[ll notice here is the clear impact of the recession starting in about 2007 on overall employment but thatfarm proprietorship and employment has been stable over this period. Youll also notice that while farm proprietorship and farm employment has declined since 1990, employment in food process has increased over this period.

- Food and Farm economy has been pretty resilient to the effects of the economic downturn9Wisconsins Local Food System

FARMERS- Urban & ruralEntrepreneurship OpportunitiesPROCESSORSFOOD PRODUCT ENTREPRENEURSNETWORKERSAGGREGATORSDISTRIBUTORSTRANSPORTMARKETSRESTAURANTSSPECIALTY RETAILFOOD & CULINARY TOURISMCOMPOST/SOIL PRODUCERS

Since 1969, the number of self-employed rural workers has expanded by over 160 percent to 5.6 million. In comparison, there was only a 64 percent growth in rural wage and salary workers over the same time period.

If current trends continue, one rural worker will be self-employed for every three wage-and-salary workers by 2015.

In the last four years, self-employment earnings relative to earnings of traditional workers reached historic lows.

In 2005, the average self-employed worker earned only one half of what wage-and-salary employees captured ($16,851 versus $31,596).

Goetz, Stephan J. (2011) "The Case for Supporting Entrepreneurs in a Jobless Recovery," Webinar presentation, eXtension Entrepreneurs and Their Communities Series, September 8. Available at: http://www.extension.org/sites/default/files/Sept2011_Case%20for%20Supporting%20Entrepreneurs%20Goetz.pdf Accessed October 12, 2011.

Where are the opportunities for entrepreneurship related to local food systems? To understand that lets look at this chart of the food systems cycle. What youll see here are just a few examples of types of entrepreneurs. 10Wisconsins Local Food System

Employment in farmingSize and type of farmsNumber farms selling for local marketsRestaurant trendsCulinary tourism trendsDirect salesNumbers of farmers markets

A look at the data..Sales of value-added products

Size and Types of Farms

Number of Farms Selling Direct to Consumers20022007% of All Farms% IncreaseWisconsin4,9186,243826.9United States116,733136,8176.20%17.2USDA Agricultural Census 2002-2007

Status of Wisconsin Agriculture 2011, Wisconsins Farm Economy Accessed at http://www.aae.wisc.edu/pubs/status/docs/status2011.pdfThis chart shows the number of farm households, income from farming activities, and income from off farm sources. Wisconsins farmers are increasingly reliant on OFF of the farm income. You can see here that there are more small than large farms in Wisconsin. Most farmers that are farming as a primary occupation are barely making ends meet, loosing on average 500 each year from farming activities.

WHO are these potential entrepreneurs??

These farms are also more likely to be looking for ways to diversify or add value to the products they grow for additional sources of income. Smaller Farms are more likely to be involved in farmers markets and value added product development

12Farmers MarketsThis chart shows the total number of farms markets in Wisconsin (red) and in the US (blue). This is based on self reported data to the USDA. 13Farms Selling Direct Number of Farms Selling Direct to Consumers2002% Total2007% Total% IncreaseWisconsin4,9186.4%6,2435.5%26.0%United States116,7335.5%136,8176.2%17.0%Value of agricultural products sold directly to individuals for human consumption. This item represents the value of agricultural products produced and sold directly to individuals for human consumption from roadside stands, farmers markets, pick-your-own sites, etc. It excludes non-edible products such as nursery crops, cut flowers, and wool but includes livestock sales. Sales of agricultural products by vertically integrated operations through their own processing and marketing operations were excluded.Value of Products Sold Direct to Consumers ($1000)2002 (adj)% Total Sales2007% Total SalesOverall % ChangeWisconsin33,4330.5243,4910.4830%United States934,0350.401,211,2700.4030%Since 2002 there has been a significant increase, 26% in the number of farms that report selling direct to consumers through farm stands, farmers markets or through community supported agriculture arrangements. In 2007 Farms that direct market made up about 5.5% of all of Wisconsins farms and about 6.2 % of farms nationwide. Youll notice that while the total number of farms that are selling direct has increased theree was a decline in the percent of the farms compared to the total number of farms.

This slide looks at the total value opf products sold directly to consumers. While overall direct sales are increasing in Wisconsin, they are not increasing as a percentage of total sales (this means farmers are finding other markets for their products). Direct sales does not capture any other sales within the regional/local economy including restaurant, wholesale sales

14Value-Added ProductsFarms Selling Value-Added Products2007% Total FarmsWisconsin2,8213.6United States78,4183.6USDA Agricultural Census 2002-2007

USDA also tracks the number of farms selling value added products. About 3.6% of farms were selling value added products in 2007, about the same as the nation.15Restaurant Trends Top culinary themes: Local, sustainable, fresh, healthy 2011 Whats Hot survey- locally sourced meats and seafood locally grown produce sustainability

Americans are looking for more healthful options at restaurants and other foodservice outlets but define healthy eating based on quality features rather than fewer calories.

Consumers place a high importance on taste regardless if they are eating healthfully or not, and some consumers equate healthier foods as not being as tasty. The majority of consumers expect to pay the same for healthier foods as those considered less healthy.

National Restaurant Association Whats Hot Survey, 2010. Accessed at http://www.restaurant.org/pdfs/research/whats_hot_2011.pdfConsumers Define Healthy Eating When They Go Out to Eat,

Each year the National Restaurant Association also surveys over 1500 professional chefs on which foods, beverages, cuisines and culinary themes will be hot trends on restaurant menus.

Consumer study conducted by NPD, a private firm providing retail and consumer market research Americans are looking for more healthful options at restaurants and other foodservice outlets but define healthy eating based on quality features rather than fewer caloriesThe feature most important to consumers seeking healthy menu options is quality, such as fresh, natural, and nutritious ingredients. Fewer calories were among the least important features.

Consumers place a high importance on taste regardless if they are eating healthfully or not, and some consumers equate healthier foods as not being as tasty. The majority of consumers expect to pay the same for healthier foods as those considered less healthy.

16Culinary Tourism TrendsCulinary destinations may be businesses, business districts, communities, or geographic regions that attract people interested in unique and memorable food and eating experiences. Dining out Retail establishments (e.g. wine, spice, or candy shops) Food tours, wine trails, tastings, cooking classes, Food related events, farmers markets, community meals).

2007 Travel Industry Association Study:

27 million travelers, or 17% of American leisure travelers, engaged in culinary or wine-related activities between 2004 and 2007. Culinary travelers are younger, more affluent and better educated Motivated by a desire for unique experiences. The study found that 90 % of culinary travelers 83% of non culinary travelers were under the age of 65.

Travel Industry Association (TIA), in partnership with Gourmet and the International Culinary Tourism Association conducted a study of 2,364 leisure travelers in the United States.

Photo credits:"Wine Tasting" by Yaniv Ben-Arie

Does shifting consumer spending from imported to local foods and shifting to local processing allow producers to retain more of the food dollar?Farmers markets generally found to have positive impacts on the local economyIowa study- each $1.00 spent generates .58 cents in additional indirect and induced sales.Labor and sales benefits but may be offset by losses to mainstream retail salesHelp larger businesses expandAct as an incubator for smaller businessesSpillover effects- spending at other downtown businesses

Impact on Local EconomiesMartinez, Steve. et al. Local Food Systems Concepts, Impacts, and Issues. ERR, 97, USDA. Economic Research Service, May 2010Otto, D. and T Varner. 2005 Consumers Vendors and the Economic Importance of Iowa's Farmers Markets . Leopold Center for Sustainable Agriculture. Accessed October, 2011 at http://www.leopold.iastate.edu/pubs-and-papers/2005-05-farmers-marketsFeenstra, G.W. 2003. Entrepreneurial Outcomes and Enterprise Size in US Retail Farmers Markets, American Journal of Alternative Agriculture, Vol 18, pp46-55. Lev, L.l. Brewer and G Stephenson. 2003. How do Farmers Markets Affect Neighboring Businesses? Oregon Small Farms Technical Report No 16, Small Farms Extension Program, Oregon State University, Corvallis, OR.

18Local Food Entrepreneurship ResourcesDowntown Business Market Analysis- Restaurant and Culinary Opportunities http://fyi.uwex.edu/downtown-market-analysis/analysis-of-opportunities-by-sector/restaurants/

Food & Value Added Ag Resources http://fyi.uwex.edu/aic/

Business Incubation Network http://fyi.uwex.edu/foodbin/the-food-bin-network/

Wisconsin Local Food Marketing Guidehttp://datcp.wi.gov/Business/Buy_Local_Buy_Wisconsin/BLBW_Food_Marketing_Guide/index.aspx

Laura BrownUniversity of Wisconsin-ExtensionCenter for Community & Economic DevelopmentLaura.brown@ces.uwex.edu