Food Financing 101: Part 3

December 15, 2011

The final installment of our Food Finance mini series

Creating Opportunity Along the Entire Food Chain

By Nessa Richman
Brightseed Strategies Founder and President

The goal of the federal Healthy Food Finance Initiative (HFFI) is to increase the availability of healthy food in low income communities. Most visible to the consumer is the matter of increasing the number of supermarkets, grocery stores, and corner stores in underserved communities, and the healthful food choices they provide therein. The role of Community Development Financial Institutions (CDFI) in this scenario is to support the development of new retail food stores and to expand and improve existing stores in their target communities.

But retail is not just about the storefront, it’s about how products get to market. What if the money spent on food at the retail level also helped develop the local economy?

Retail is just one link in the “food marketing chain.” This chain comprises a possible six segments, each of which houses many types of food enterprises.

  1. Retail/Food Access; e.g., grocery stores, corner stores, farmers’ markets, Internet-based ordering platforms.
  2. Distribution; e.g., Food Hubs: centrally-located facilities designed to aggregate, store, process, distribute, and/or market locally produced food.
  3. Processing; e.g., commercial kitchens, value-added producer cooperatives, fresh-cut produce operations, meat processing facilities.
  4. Agricultural Production; e.g., farms and ranches.
  5. Technology and Infrastructure; e.g., fertilizer/pest management companies, farm equipment companies, seed and feed businesses.
  6. Waste Management; composting facilities and recycling operations.

Brightseed Strategies is working with the CDFI Fund, the co-writers of this Food Finance mini series, Opportunity Finance Network (OFN) and The Reinvestment Fund (TRF), and other strategic partners, to help CDFIs understand why it is important to think about the whole food system when developing a national financing initiative. Educating CDFIs about the full spectrum of healthy food enterprises within healthy food systems increases their lending opportunities, and maximizes the positive impacts of these businesses on their communities.

Healthy food systems are critically important to increasing healthy food access and affordability. This is true in communities of all income levels. Vibrant food production, processing, and distribution enterprises support healthy retail options and a healthy local economy. If these enterprises are locally owned, they provide more benefit to the community in at least three measurable ways:

  1. Better jobs. Local ownership of small businesses matters for economic growth. On the community level, more locally owned small (10-99 employees) businesses mean higher individual per capita income growth. Conversely, a high density of large (more than 500 employees) firms that are not owned locally leads to lower individual per capita income growth. This is true for both rural and urban areas.
  2. Bigger economic return. Local businesses are better for the local economy. When compared to leading chain competitors, local stores generate twice the annual sales, recirculate revenue within the local economy at twice the rate, and, on a per square foot basis, have four times the economic impact.
  3. More community pride. Markets exist within social and cultural contexts, and these contexts affect how resources are allocated. A greater density of locally owned businesses increases the likelihood of community members voting and participating in community civic, political, religious organizations, and even sports clubs, a noteworthy point for those interested in improved health outcomes

HFFI will increase food access in targeted communities, and do much more. If the national initiative’s vision includes goals to encourage or develop economically vibrant, socially equitable, and environmentally sustainable food systems, investments made by CDFIs will benefit agricultural producers, healthy food enterprises of all sorts, and consumers of all socioeconomic levels.

In order to do this, a CDFI can develop a go-to-market strategy in collaboration with potential borrowers, intermediaries, investors, and partners. This may be the best way to develop a customized plan responsive to community needs. In the government and non-profit sectors, we may phrase this work differently: the national HFFI is really an opportunity to develop a HFSFI, a healthy food system financing initiative. And some regions, cities, and communities are creating innovative programs – from TRF’s growing interest in investing in the local food system to Boston-based The Carrot Project, with its focus on supporting small and midsized farms and farm-related businesses.

images courtesy Brightseed Strategies

For the complete series, please visit these links:

Food Financing 101: Introduction
Food Financing 101: Part 1
Food Financing 101: Part 2

Special thanks to Alison Hastings of the Delaware Valley Regional Planning Commission (DVRPC), who coordinated the Food Finance series, and to Patricia Smith of The Reinvestment Fund, Pam Porter of the Opportunity Finance Network, and Nessa Richman of Brightseed Strategies for contributing.

DVRPC and their partners are regular contributors to the Dodge blog on issues of food policy and regional food systems.