Thursday, October 7, 2010


It looks as if the new found popularity of local food movement is pinching the fortunes of organized retailers, if recent reports regarding attempts by a few of them to start some thing like a farmers' market within their premises to attract more customers or to recapture some of their lost clientèle. Foods offered at the farmers' markets are supposed to be with low carbon foot prints because they come from nearby farms where cultivation is managed with minimum use of energy, fertilizers and pesticides. How supermarkets depending on large scale production systems and economy of scale can co-exist with the small scale operations that characterizes farmers' markets is some thing one has to wait and see. If it is based on philanthropy with an intention to give protection to the local growers, such practices need to be encouraged. But the economics and logistics do not favor such an interpretation of the move by large retailers to open up local food section in their premises. If it is a part of a slow process of integrating local producers into the location specific retail stores, one can only appreciate such changes.

"It's not hard to see why supermarkets are nervously intrigued by farmer's markets. In the past five years, the number of markets in the US has ballooned, up from 1,755 in 1994 to 5,274 in 2009, according to the USDA. But the problem for Big Food is that farmers' markets exist as an alternative to the centralized, mass-produced, industrialized system that delivers most of our food. The items at farmer's markets come from small farms or bakeries located within 100 miles from where they live. They're also ultra-fresh, seasonal and mostly unprocessed, and the direct-to-consumer system lets farmers earn a healthy profit for their food. Supermarkets, in contrast, sell food from all over the globe and pay the sorts of prices only large producers can afford to accept. Mike Siemienas, a spokesperson for Supervalu (SVU), which owns Albertsons, defended the use of farmers' markets signs in 200 of its stores in Washington, Oregon and Idaho over the Labor Day weekend because the produce advertised came from local farms. It's certainly a better approach than Safeway's interpretation of a farmer's market, but the price those local farms are getting for their produce is probably much less than what they'd get at an actual farmers' market. By comparison, organic, which is also a reaction to mainstream food production, has been a much easier trend for big food companies to monopolize. Large manufacturers like Kellogg (K) and General Mills (GIS) operate major organic brands and many large, conventional fruit and vegetable producers have organic side businesses. Local may actually be the sort of party food companies can't get into, at least not without looking like they're trying way too hard.Frito-Lay (PEP) and McDonald's (MCD) have already mounted ridiculous attempts to establish local cred. Frito-Lay wheeled a traveling greenhouse into the middle of Times Square and brought along potato farmers to explain how Lay's potato chips are made with actual potatoes. In July, McDonald's put up billboards in Washington state announcing things like "Served in Seattle, Grown in Pasco," accompanied by the disclaimer "participation and duration may vary."

The issue of returns to the farmers who join league with super market chains is still a ticklish issue because of the compulsion to share the sale proceeds between the established retailer and the local producer. In contrast in a genuine farmers' market there is no middle man to gobble up a part of the sale proceeds resulting in a higher net return to the grower. It is not clear as to what other services the retailer is offering to the growers besides the premises and the brand value. Ideally the super markets must lend their expertise to the local grower community in producing high quality products and train them in proper handling and packing before channeling them through their store facilities. Only such a symbiotic relationship can promote locavore movement to any significant extent without affecting the fortunes of existing super markets. Under no circumstances large players should be allowed to misuse the "goodwill" generated by the "local food" concept for increasing their cash flow.


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