“Locally sourced” is as American as baseball, Mom, and apple pie. In the produce supply chain, it suggests immediate postharvest availability, maximum freshness, and local distribution. These perceptions drive greater consumer demand which, in turn, creates a strong incentive for distributors, retailers, and foodservice companies to source and sell local produce.
Greater proximity to growers typically creates supply chain speed, simplicity, and cost efficiency. However, the complexities of the fresh produce industry make local sourcing difficult. Discussions with executives from a national foodservice company and a regional produce distributor provide insights into the opportunities and challenges of taking on ‘local’ suppliers.
Profitable Growth
Properly implemented, local sourcing can have a positive impact on a supplier’s income statement. Top-line revenue growth can be achieved by serving the expanding ranks of locavores. Operating costs can be reduced by optimizing supply chain processes.
The demand-driven opportunity for produce growers and suppliers is clear as the value of local food sales continues to grow. Industry data indicates that local food sales totaled at least $12 billion in 2014 and projections have the market hitting $20 billion in value by 2019.
“Every year, we have the conversation about how do we get more local,” notes Greg Cessna, CEO of Consumer Fresh Produce Inc. in Pittsburgh, PA. “From a purely marketing standpoint, it’s the real deal and we’re getting more pressure for local and organic produce. We see it in our foodservice customer demand.”
Not only is demand rising, but multiple studies indicate consumers actively seek out stores and restaurants that serve locally sourced products. And, one-third of consumers are willing to pay a premium of 10 percent for local foods, according to a 2014 study by global management consulting firm A.T. Kearney in Chicago. Driving this consumer participation are perceptions that local produce is fresher, tastes better, promotes sustainability, and supports the local economy.
Proximity
Often, the pursuit of sales growth can be an expensive proposition involving wider source and market areas. Proximity to both suppliers and customers vastly improves with local produce, leading to potential supply chain cost efficiencies and greater product availability. This further encourages local sourcing initiatives.
“Our customers are asking for products sourced locally and regionally,” confirms Denis Jennisch, senior director of sourcing and merchandising for produce at US Foods. “Another driving force is with climate change and growing conditions around the country, it’s getting harder to supply our needs based out of one location or a couple locations.”
