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local food

Grocers Are Failing to Meet $20bn Consumer Demand for Local Food

July 25, 2018

Forager, a local food digital procurement platform, recently conducted a survey of shoppers in New England and upstate New York. Results from the survey lent credence to their hypothesis: while the demand for local food has never been greater, many grocers are ill-equipped to serve customers who are willing to pay more for quality food that supports their local economy.

We asked David Stone, founder and CEO of the startup, to tell us more about the survey.

Unless you’ve been hiding under a very heavy and conventional rock for the last 10 years, it should come as no surprise that local food is on a meteoric rise. The local food market in the US grew from $5 billion in 2008 to $12BN in 2014, and is expected to rise to $20 billion by next year, according to Packaged Facts, the market research firm. The demand is as bright as a glistening fresh strawberry. Data from our survey supported this trend: when asked, 84% of survey respondents reported that they had locally-produced food on their shopping list.

What’s fueling this rise in demand? Some point to the environmental costs of large-scale, industrial farming and the toll of trucking produce thousands of miles across the country. Many believe that local produce tastes better, or has a longer shelf life, due in part to freshness. Yet the overwhelming reason that consumers said they were seeking out local food was to support their local farmers and economy, a rationale chosen by nearly nine out of every 10 survey respondents.

Clearly, consumers want to feel a connection to the land and those working the land to supply them food. Supporting this interest, small and independent farms are on the rise after several decades of decline. According to the USDA Census of Agriculture, in the last three decades the number of farms smaller than 49 acres has increased by 28%, fueled in part by youth and the organic movement, and further bolstered by a 25-year growth in farmland protection programs, which have risen from five in 1980 to 199 in 2015.

While small, independent farmers only supply a small portion of the US food market, this trend represents a significant amount of growth. Demographics are helping to fuel this shift as consumers, especially Millennials and Generation Z, are more interested than prior generations in where their food comes from. Yet most of the current demand cannot be met entirely through direct-to-consumer channels, even as the number of farmers markets in the US has surged to meet this demand, growing nearly 500% in the last decade, according to a 2015 report by American Farmland Trust. As exciting as this is, a 2015 study by the FDA found that only 36% of local food sales occurred through direct-to-consumer channels. Our data supports this: while farmers markets are certainly popular among consumers, 87% of survey respondents reported going to their local grocery store for local food purchases.

While the pressure from multiple directions for the grocer is approaching overwhelming– whether it’s the neighborhood independent, food co-op or the national chain supermarket — the grocer still remains the number one location for fresh and local food shopping needs.

Consumers clearly desire a selection of local products – with everything from veggies (70% of reported local purchases), to fruits (47%), or even flowers (22%), yet among conventional grocery shoppers, 55% of survey respondents reported barriers to buying local products because of limited offerings, versus 35% at independent and natural stores. And then there’s the huge delivery promise perception gap. While 81% of grocers believe they are delivering on the promise of fresh, 67% of consumers are completely dissatisfied with local fresh produce in their grocery store. Many consumers will abandon their carts and change stores if the grocer fails to deliver on the promise of fresh, according to a consumer survey by Blue Yonder.

So, what’s stopping grocers from delivering on this desire for local. With such a high and demonstrated demand for local food, shouldn’t grocers and other wholesalers be capitalizing on this trend?

Well, it turns out that it’s a lot simpler to source from one or two large distributors than from many local, small-scale producers. Furthermore, with an increasing number of local produce varieties, the complexity rises exponentially.

There is plenty of work to be done. Summer is here in the North East and many are reaping the benefits of this magnificent produce. Consumers are asking for it – whether it’s organic strawberries, purple kohlrabi, Skyphos Red Butterhead Lettuce, or Lacinato kale. And unless they’re near an especially robust grocer (such as Lucky’s Market), they’re going to score their seasonal bounty directly from their farmer. For conventional grocers, this is an opportunity that they cannot afford to miss. On average, consumers shop at six different grocery stores, and if these stores want to stay in business, they must be able to offer the fresh, local food that their customers are looking for.

Prior to founding Forager, Stone created the e-gifting category when he co-founded CashStar, which subsequently sold for $175 million, a more than 4x return and the largest pure tech exit in the history of Maine.

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