It's the economy of scale, stupid
It’s the economy of scale, stupid.
Racing to deliver cheap food at all costs, farmers around the world are consolidating amid rising production expenses and declining income. More acres are held in fewer hands, according to the U.S. Department of Agriculture.
The system, which is taking a growing environmental toll, is leaving many small and mid-size producers behind: last year more than 2,700 dairy farms closed mainly due to industry mergers.
Оne small tech startup wants to fix the broken system, building a different kind of food economy that considers the “triple bottom line” — people, planet and profit. Launched in Cleveland, Ohio, two years ago, Farm Fare is looking to bring data and insights to local farms and connect them with nearby restaurants, schools and other institutional buyers.
The startup developed a business-to-business marketplace that allows food producers and
small food warehouses, known as food hubs, to keep the costs down by sharing sales,
transportation and logistics resources. Farm Fare aims to help them compete with large
economies of scale and reach big clients they would not be able to cater to alone.
The startup says it’s betting on the $630 billion market of the institutional food wholesale
buyers like schools and hospitals who are interested in supporting local food producers, but
often find it easier to order food through giant conglomerates from across the world. The
startup, which works with big clients like the University Hospital in Cleveland, plans to add new accounts next year, including the Cleveland Clinic and Bon Appetit Management Company. “We feel this deep urgency about the horrific imbalances happening in agriculture right now,”
Farm Fare co-founder Cullen Naumoff told Karma. “What our platform does is that it finally
allows customers who are begging for local food and family farms who absolutely need a
market outlet to be aligned and connect well with one another.”
Farm Fare is part of the growing agrifood tech movement that is driving innovation along the
food and ag supply chain. Investors poured $16.9 billion into the space last year, up 43%
compared to 2017, according to AgFunder’s report. Worth $8 trillion, agriculture employs 1 in 3 of all global workers, the U.N.’s Food and Agriculture Organization says.
In the U.S., 70% of all agriculture sales come from 4% of farms, Naumoff said, citing what she
said are U.S. Census Bureau figures.
Funded by founders so far, Farm Fare is raising $500,000 with plans to expand beyond Ohio to New York, Vermont and other eastern U.S. states after the release of an updated version of the platform next year. The startup already received $100,000 this year from the Innovation Fund of Northeast Ohio, a pre-seed fund for tech startups. The non-collateral loan needs to be matched dollar-for-dollar and repaid if the business is successful, according to the fund’s
website. The startup also became a finalist at the 2019 Women Startup Challenge in New York.
Farm Fare, which currently works with five food hubs, plans to keep expanding its network to
dozens of hubs throughout the Northeast in the next few years. Farm Fare was born in 2017 after Naumoff spent a year driving a delivery truck for the Oberlin Food Hub and saw the need for building a new kind of supply chain that helps farmers save money by taking advantage of the existing resources. She collaborated with a former chef
Laura Adiletta and co-founder of Great Lakes Brewing Company Dan Conway who brought
business and manufacturing planning expertise to the project.
Farm Fare has become a crucial tool for the farmers around Youngstown, Ohio, an area rich in natural resources, but with a limited access to the market, says Melissa Miller, the president of the Lake to River Food Cooperative. “Farm Fare has been really good at getting our product to the community that has both the financial ability to pay and the interest to buy the product,” said Miller. “We need help telling our story — farmers by nature like to be farmers and not salespeople so this is the vital link for
Secret Ingredient Is Data
Farm Fare’s key ingredient is data. Unlike big agriculture companies, small farmers usually
don’t have access to supply and demand forecasts and often have to guess what to grow
every year, Naumoff says. Every transaction on the Farm Fare platform is generating specific
regional demand data, which allows farmers to coordinate with one another, plant what is best suited for their land and reduce the environmental impact.
Farm Fare is competing with several IT companies that offer various supply chain solutions,
including Local Food Marketplace, FreshSpoke and Aggrigator. “The genius of our system is not the software itself but the way that we glue it together,” says Naumoff.
Farm Fare charges a transactional fee of 15% for every sale. In return, clients get access to
platform and data, in addition to sales and managed outbound logistics service, which
contracts fleet companies to match clients’ needs. One of the biggest challenges is to get
over the inertia in a society that has for a long time valued the lowest costs, says Naumoff. She spends a lot of time building strategic partnerships with influencers like health associations who work with groups of hospitals on preventive care and nutrition.
In rolling out the mindset of collaboration, Fare Fare is forging relationships, said David Sokoll, co-director of the Oberlin Food Hub. “What’s been more impactful is the conversations, networking, the intention around a region coming together to solve collective problems as opposed to a small struggling nonprofit trying to tackle the world,” he said.