Good Practices
The positive impacts of SFSCs can often been observed not only in the economic dimension, but also and even more in the social sphere (higher autonomy, cooperation and social relationships between stakeholders, trust and solidarity, etc.) and in the environmental sphere (reduction of pollution and food waste, preservation of natural resources and agrobiodiversity, etc.), where the impact of SFSCs is usually perceived as significantly higher than that of conventional supply chains. However, SFSCs can bring about also costs and challenges that need to be properly addressed and managed. The Coach project analysed several case-studies (“beacons”) to capture the effects of SFSCs on costs and benefits for producers, highlighting a number of good practices that allowed producers to enhance revenues and positive impacts, and reduce costs and negative impacts.
This section presents some examples of good practices extracted from the Coach project, grouped in 5 main areas:
- Cost reduction
- Sales increase
- Fair distribution and participatory governance
- Contributing to social equity
- Contributing to environmental sustainability
Cost reduction
Participating to SFSCs’ initiatives ask producers to develop and manage new functions and activities that in conventional channels are externalised to other supply chain operators (e.g., marketing and communication, packaging, transportation, sale, etc.). These new activities, besides requiring new knowledge and skills, also generate additional costs that, if not properly managed, can threaten producers’ viability, diminishing the economic gains from SFSCs.
Although there is a rather high variability across different SFSCs’ initiatives and typologies, labour costs tend to be higher because additional services are needed to market products through SFSCs, and transport costs are often higher too, because delivery is taken in charge by producers themselves. Moreover, most of the time SFSCs are participated by small-medium producers, unable to achieve significant scale economies (the reduction of unit production costs thanks to the increase in production volumes).
For all the actors, the highest costs are associated with labour. Other costs are related to the filling of the food packages with the amounts ordered by customers, or to the manual peeling or harvesting of products. In comparison to the apples sold to intermediaries and in supermarkets, which want to have an apple picked very early, for Adamah the apples are taken once ripe. This needs an extra harvesting team and a longer cultivation time, which costs 10 cents/kilo more to the producer. As Adamah directly delivers all product, the workforce costs also include the workforce driving to each private place to do the deliveries. The second highest costs, but well beneath are driving costs.
In the case of the wheat producer in charge of storing the wheat for the whole supply chain, also the costs linked to machinery and equipment significantly affect his activity in GranPrato, more than the conventional value chain. That is because the limited quantities of wheat that are produced and processed in GranPrato value chain cause an underutilization of storing silos, as GranPrato wheat has to be stored separately but is not enough to fully fill up a silo.
In order to partially overcome these problems, organizational-level responses can be devised to move away from an individualistic approach. This requires the development of collaborative initiatives that are based on the joint management of certain distribution and logistics steps and activities characterized by the presence of minimum scale constraints.
The availability of local facilities (e.g., abattoirs, mills, storing silos) and their collective management can allow producers to combine their efforts in feeding the market with a wider supply, while sharing fixed costs of such facilities in a way that is more efficient and less burdensome for everyone.
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Innovative logistic solutions enabling economies of scope
For their delivery, Adamah established concrete delivery routes within certain areas of Vienna and Lower Austria, passing by once a week by each station. This requires an important logistic effort but helps saving CO2 as well as costs.
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Resource pooling to lower production costs
A shared plant for the processing of second-grade products (e.g., tomatoes) makes it possible to create a more profitable alternative market, allowing economies of scale to be achieved. The same applies to the intangible investment in communication and promotion made for the ConServe label, which can be used by all producers participating in the association.
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Local food hub
Tamar Grow Local (TGL) is one of the most widely celebrated and long-lasting food hubs in the UK. They have pioneered a territorial approach to initiating and nurturing local food production, processing and consumption in the Tamar River catchment, on the Devon/Cornwall border (UK). TGL acts as an umbrella cooperative for a number of local food projects, including a regional food hub for local producers, an apple juice cooperative, and honey cooperative, and a farm start incubator site.
Resource pooling allows not only to achieve economic efficiency and costs reduction, but it also determines the very possibility for some small producers to participate in the SFSC initiative. As a matter of fact, there are frequent difficulties of accessing SFSCs for small producers, related to inefficiencies of scale, especially when production processes require the use of machineries or facilities involving high fixed costs (e.g., a mill, an abattoir, a warehouse or a harvester), and scarcity of workforce needed to manage consumer relations and/or labour-intensive processing and distribution activities.
Resource pooling: Conserve
Resource pooling: GranPrato
Sales increase
SFSC are assumed to increase prices earned by producers, compared to other marketing channels. However, for the objective of increasing total revenues, it is important not just obtaining a higher unit price but also developing the market, obviously keeping production and marketing costs under control.
A common obstacle faced by producers selling individually through in SFSCs, is the limited size of the market. Even if, especially for small producers, SFSCs are often the only possible way to “stay on the market”, due to the lower barriers to entry and the existence of solidarity mechanisms between producers, sometimes they are not sufficient to reach economic viability.
Multiple marketing channels are often put in place by producers to reach economic viability, and many of them report the need to build wider networks and open other SFSCs channels. Particularly important with this regard is public procurement, for its capacity to absorb a bigger quantity of products on a more regular basis.
Increasing sales on SFSCs often asks for collective organizations able to put together production from different producers, offering a more complete assortment able to attract consumers’ demand and access marketing channels otherwise not accessible, such as public procurement or other “big customers”.
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Organizing networks of farmers and consumers
Paniers Marseillais (“Baskets from Marseilles”) is an association under the French law, created in 2007, aiming at putting producers and consumers in partnerships. It is a contract-based direct selling system. There are currently around 70 producers, located up to 100 km from Marseilles, providing food to more than 30 consumers’ groups located in Marseilles. The association creates, organises and oversees affiliated groups known as Paniers de quartier (“Neighbourhood Baskets”). The Paniers de quartier are distributed all across the city of Marseille, including in low-income areas. This is an important dimension of PAMA’s commitments: in a major city where some of the poorest neighbourhoods in France are located, PAMA’s will is to ensure everyone can access the organic, fresh and local shares provided by its member farms.
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Organizing networks of farmers’ markets and promotion
Campagna Amica (“Friendly Countryside”) is a Foundation promoted by Coldiretti, one of the most important farmers’ union in Italy. It is meant to group a number of initiatives aiming at promoting short food supply-chains and local and quality food to the benefit of associated farmers, such as agritouristic farms, pedagogic farms, farm restaurants, farmers’ shop and farmers’ markets, and agrobiodiversity preservation. All the initiatives of Campagna Amica benefit from a strong promotion and information campaign by the Foundation, addressed to farmers, to public authorities, and mainly to consumers. Particularly important is the network of Campagna Amica farmers’ markets, spread all over Italy, organized and promoted by the Foundation, with clear rules about farmers’ participation, selling modalities, controls, and price formation. In particular, farmers should: – strictly sell their own products, which are locally produced on the farm and directly sold by the farmer without any intermediaries. Farmers should always declare the food origin and the farming method applied. – the product price should always be fair and transparent; which means that all the products sold by producers to consumers should clearly display the prices. Moreover, at the Campagna Amica farmers’ markets all prices are shown on a board at the entrance.
More information at: https://www.campagnamica.it/
Fair distribution and participatory governance
The economic performance of SFSCs appears to be fostered by increased margins, obtained through the internalization of marketing functions, and premium prices, obtained through consumers’ higher willingness to pay for locally produced and fresh foods, sometimes coupled to solidarity towards local producers.
Moreover, in most SFSCs initiatives, producers are generally able to act as “price makers”, sometimes employing mechanisms and agreements to fix prices and/or marketed quantities, while on conventional long channels they act rather as “price takers”.
Indeed, considering the general aims of SFSCs’ initiatives, one of most important issues is the possibility to implement governance of prices and risk sharing in order to attain a fair and transparent vertical distribution of the value added created in the value-chain among the different actors involved.
However, proponents of SFSCs’ initiatives often urge the transition from a logic of “high” prices (for producers) or “low” prices (for consumers), to a logic of “right” prices, where prices are set either on the basis of real production costs calculated for each food product, or somehow controlled with reference to the prices of the same products in alternative marketing channels (wholesalers, supermarkets, etc.), in a way to balance the needs of both producers and consumers.
Some COACH beacons have mechanisms and agreements between participant producers on price setting at the different steps of the value chain, and on quantity to be delivered by each participant. In some cases, these mechanisms are based on formal governance mechanisms, while in other ones, long-term face-to-face relationships allow for trust-based solutions.
Results from the quantitative analysis show that the overall profitability of GranPrato initiative is higher than that of the conventional supply chain. This is true especially for the wheat producers who benefit the most from the agreement on prices contained in the GranPrato Supply Chain Agreement. In GranPrato, all the members of the supply chain signed a Supply Chain Agreement. Therefore, every actor in the supply chain have to sell at an agreed pre-determine price, which is 40€/q for wheat, 70€/q for flour, and 3,30€/kg for bread. Also, quantities of wheat provided to the supply chain are decided in advanced and equally distributed among producers, so that if one year one farmer fails to provide its agreed share of wheat, the other farmers jointly cover his share.
COACH Beacon: GranPrato – ItalyGood practice on
Shortening the chain through coordination with retailers
Pipers Farm is a butchery and online retail business located in England. It was established in 1989 with a vision to build a business that helped to sustain smaller scale farming businesses. They started working with beef – their own and from neighbouring farms. The business has since expanded to include dairy, baked goods and non-food items (home and cookware). Initially meat was sold through shops, catering outlets and wholesale markets, but as of February 2019, sales are exclusively online. The business is now embarking on a new stage of expansion. Pipers farm works with farmers to produce quality products to agroecological farming principles. From an economic point of view, the initiative provided higher and more stable prices to farmers, and benefitted the local economy through supporting farmers and local abattoirs. From a social point of view cooperation among producers has been enhanced, and cultural and regional identities strengthened. Moreover, consumers’ food awareness and knowledge has been raised. From an environmental point of view, food waste was reduced through innovative butchery techniques and freezing cuts immediately. Higher, more stable prices paid to farmers making agroecological production systems economically viable. This reduces the use of pesticides, agrochemicals, preservatives and other chemical inputs, while promoting agrobiodiversity and the preservation of natural resources and landscapes.
Participatory governance: GranPrato
Fair prices: Paolo Colzi farm
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Participatory governance of SFSCs
Gran Prato is an initiative set up in 2011 aiming at creating a collaborative short bread supply chain in the Prato area (Tuscany). Gran Prato gathers 10 wheat producers one of which also take charge of the wheat storage, a miller and around 12 bakeries and confectionery shops, all situated in the Prato province. The aim is that of “unhooking” local cereal production from the global market and orienting it towards the local and regional market, agreeing on a fair remuneration for the farmers and all the operators in the value chain, maintaining high-quality standards for the products. The actors operate following a Supply Chain Agreement and some production specifications they jointly subscribed, that regulate production methods (cultivation, milling and bread-making), prices (of wheat, flour, bread and other products), adhesion to and functioning of the value chain, traceability and control mechanisms, and promotional activities on the local market. In 2013 the Association defined the cost of the storage service, the wholesale price of flour, and the consumer price of the bread “bozza pratese” typical of this area. The definition of prices originated from a study on production costs developed by external experts from the local University. These prices have been kept stable since then, notwithstanding the strong fluctuations of prices in the conventional supply chain (and in particular in the grain market). Association members can also use the association’s collective trademark to identify the products of this short food supply chain on the market, that is the bread “bozza pratese”, flour in bags, but also pizzas and other processed products.
The advantages of SFSCs do not lie only on the possibility to obtain higher prices, but rather in the usually higher stability of market sales and incomes, deriving from more stable and direct relationships with customers and/or end consumers.
Other specific ways of governing value distribution along the chain, also considering risk-sharing, are those of solidarity purchasing groups (SPGs) and community supported agriculture (CSA). Within these SFSCs, long-term collaboration between producers and consumers allows for the development of a mutual trust that permits to manage the phenomena of opportunism and free-riding on completely different bases with respect to the standard value chains.
The establishment of long-term relationships producers-consumers allows also to know in advance the quantity and typology of products to be delivered and, in some cases, to have a reasonable certainty to market all the products thanks to solidarity mechanisms. This helps to stabilize income and to better plan production, thus reducing waste/loss of products and increasing investments efficiency and production organization.
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Informal long-term relationships
Pipers Farm establishes long term, mutually beneficial relationships with producers. Prices are agreed annually through discussion based on the cost of production plus a margin, and reflect a fair deal for both farmers and our company. Those relationships build up trust and solidarity within the organisation, so that when, for example, the price of beef or lamb fluctuates, producers stay with you because they know that you are providing them with an alternative route to market which is allowing them to farm in the way that they want to farm.”
Contributing to social equity
On the social dimension, SFSCs can allow for a stronger cooperation among producers and the creation of trust, and collective actions. SFSCs can also create social relations between consumers, favouring the development of consumers-driven initiatives and the reinforcement of a sense of belonging to local community and of solidarity.
The direct contact between producers and consumers allows the latter to access information and knowledge about products and production processes, acknowledging and giving appropriate value to producers’ work while enhancing consumers’ education on food-related topics. Consumers may also learn about uncommon products (such as niche products, local varieties, traditional foods), normally not available on conventional marketing channels, and acquire knowledge about how to prepare food.
Knowledge sharing in farmers’ markets: Campagna Amica Coldiretti Toscana
In some cases, it has been noticed how, participating in SFSCs, consumers may even learn about the very existence of farmland in the territory, especially in urban and peri-urban areas, increasing their consciousness (and “voice”) about the importance of agriculture in their own locality.
People often do not even know of the existence of such an important agricultural tradition in the Prato area, in between textile industries. They do not believe that such a wheat production can originate from Prato and often ask: “where is all that wheat in Prato?”
COACH Beacon: GranPrato – ItalyGood practice on
Education
There is a cultural and educational dimension to this initiative: each week, the benefiting families are taking the opportunity to create links with the other members and with their farmers. At least once a month, the families meet during a common activity that can take different shapes: cooking workshops, invited dietician, farm visits, etc. These meetings encourage group cohesion, the evolution of food practices, and the transition from consumer to consumer-actor
Les Paniers Marseillais – FranceGood practice on
Exchanging and learning
Furthermore, all actors (producers, consumers and volunteers) are valued in the network and benefit from regular learning and knowledge sharing activities. Indeed, the Nyíregyházi Kosár Közösség has trained and supported the creation of about a dozen buying groups across the country based on its same model, supporting them by facilitating knowledge sharing on key themes (e.g., effective external communication, outreach to new customers, inspiring volunteers).
When sourcing via SFSCs, consumers normally pay higher attention to what they buy, how it is produced, and by whom it has been produced, therefore asking more information. Often consumers show the will to socialize with producers, sharing values and ideas besides basic information on the product. Producers, too, aim at gathering more information on consumers’ behaviours and habits within SFSCs, getting opinions and suggestions directly from the final users, and may aim at involving consumers directly in their production decisions, co-deciding with them the rules of production, the quality food must have and sometimes sharing the risk of the production activity (e.g., in Solidarity purchasing groups and in Community supported agriculture).
If it is usually true that SFSCs enable consumers to buy fresher and higher quality products as compared to conventional chains, especially regarding nutritional and organoleptic quality and durability, they are not always the more convenient shopping option. Sometimes, prices charged in SFSCs are higher (or even significantly higher) than those charged in conventional supply chains.
Indeed, problems to access SFSCs are not just a matter of higher prices, but also lack of time to spend to participate, and insufficient information on “the rules of the game”. The limited variety of products provided, the seasonal availability of some products, and the higher amount of time needed for finding SFSCs initiatives (not well advertised as, e.g., supermarkets), doing a complete weekly shopping and cooking fresh products (compared to pre-washed or pre-cooked ones), contribute to increase the total cost of food for consumers.
All these factors may affect consumers’ accessibility to SFSCs, especially for low-income consumers, unless some solidarity mechanisms are put in place.
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Making food accessibility possible
This is an important dimension of PAMA’s commitments: in a major city where some of the poorest neighbourhoods in France are located, PAMA’s will is to make sure everyone can access the organic, fresh and local shares provided by its member farms. No neighbourhood should be left behind, not even the infamous Quartiers Nord, which are famous all over France for symbolizing social challenges of all kinds. Beyond cultural barriers, there are also geographical limits: consumers from poor neighbourhoods often have difficult access to public transportation. Coming to the distribution point at fixed times is no easy task for them and it has costs
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Knowledge exchange and education
Tamar Grow Local (TGL) aims to improve local food security and support local food production through a mix of community, education and commercial endeavours. Over time the focus has become increasingly to work with food producers; however, community and social impact work is still important. TGL’s model is built on knowledge exchange and education. TGL recognises there is a need for a shift in attitudes that can lead to a rural regeneration in the Tamar valley and beyond. TGL states that part of its mission is “Raising awareness of the benefits of local produce and the unique market gardening history of this area.” (TGL website). TGL is committed to replicating its model through different forms of support, education and mentorship.
COACH Beacon: Tamar Grow Local – UK
Besides the economic benefits generated, another main driver of cooperation is exchanging knowledge and experience among different supply chain actors in the network. For example, such exchanges have enabled farmers to understand better what makes a flour good from an artisanal baker’s perspective and why, and vice versa, the baker gaining insights into why farmers may choose to grow specific cereal varieties.
COACH Beacon: Farmer-miller-baker network – Hungary
Tierra-Papel-Tijera is part of several networks of producers with whom they exchange their products, which has generated, in addition to a marketing network, also a social and political network to be able to influence policy-makers in favour of this production model. From these networks comes the farmers’ market held on the first Sunday of every month, a market that is a great success in the area and which, in addition to being a sales space, is a very important meeting place between production and consumption. This space is used for activities and to disseminate experiences, campaigns and complaints related to the agri-food sector. As a result of these experiences, a community has been built among farmers in the area and agroecological production has been made visible
CSA Experience: Tierra-Papel-Tijera
Knowledge co-creation: Farmer-miller-baker network
Besides reducing food waste and contributing to the preservation and recovery of natural capital, ConServe contributes also to the preservation and recovery of human capital, through the employment of disadvantaged workers.
Contributing to environmental sustainability
On the environmental side, SFSCs are usually considered (and observed) to generate significant positive impacts.
SFSCs can contribute to the preservation of agrobiodiversity. Indeed, in SFSCs local and/or rare breeds and vegetal varieties can survive and be economically viable thanks to the higher flow of information on and products’ characteristics reaching consumers that ease the marketing of such products which are not able to enter “modern” value chains, usually asking for standardized products and not interested in local specificities. Moreover, the higher diversification of production at farm level, required to meet the specificities of consumers’ demand in SFSCs, favours agrobiodiversity.
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Preserving agrobiodiversity
The supply chain of heritage varieties of wheat is a model of conservation of agricultural biodiversity that started in 1996 at the initiative of the Institute of Botany and Elkana.
COACH Beacon: Reintroduction of forgotten crops by Elkana – Georgia
In the fields, there are no standards predefined by the members: “we can try population varieties, hybrids, reproducing our own seeds, white eggplants, Black Egyptian beetroots. We can educate members to new tastes, for example with the Sharp Cabbage from Château-Renard, which has a very particular, almost fruity taste”.
COACH Beacon: Les Paniers Marseillais – FrancePreserving agrobiodiversity: Elkana
Preserving peri-urban agriculture: Les Paniers Marseillais
SFSCs also have positive impacts on the reduction of pollution, as usually consumers buying in SFSCs pay higher attention to how food is produced, favouring organic products, low chemical inputs products, and bulk products, thus contributing to the reduction of pollutants’ emissions and packaging waste.
Moreover, online marketing and logistics, as well as a more precise planning of production on the basis of consumers’ demand, may contribute to the reduction of food losses and food waste. Sometimes, SFSCs also offer the possibility to sell products that other marketing channels would not accept or would accept at very low prices, due to imperfections in shape or size.
There is almost no waste on the farm, as everything, including strangely shaped or ugly-looking vegetables, is brought to the distribution points in bulk. This also results in saving stocking and packaging wastes and costs.
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Reducing food losses along the supply-chain
Many farmers emphasise a second source of higher revenues, namely the good price they get for products classified as ‘‘second class’’ under industrialised market co-ordination. In the common marketing channel, these products are sanctioned rather hard by a substantial price difference compared with ‘‘first quality’’ products.
Possible lines of intervention
To conclude this Learning Module on Costs & Benefits and leave SFSCs producers with some useful tips for proactive reflection, we can identify some possible lines of action for future strengthening of SFSCs. These lines of action can be pursued by SFSC collective organizations and also supported by nongovernmental organizations and by public bodies, at local and regional level:
Actors’ empowerment and capacity building. Empowering producers and improving their knowledge and skills should be the basis for any action. Training should address not only farmers and processing firms, but also other stakeholders (such as local public institutions, Ho.Re.Ca. operators, etc.) using tools for capacity building such as direct knowledge, skills and experiences exchanges between peers, short courses, workshops and study tours. Investing in producers’ marketing skills is very important, too, and should involve training support in digital marketing as well as traditional marketing tools, branding, packaging and labelling to better convey the added value of the products and build brand/customer loyalty.
Supporting collective action. Supporting the development of appropriate forms of collective producers’ organisations enabling the reduction of production and distribution costs, and easing the access to SFSCs for small-medium producers can be highly important. Collaboration between farmers and other downstream producers can contribute to contain certain cost items, in particular those related to logistics and other distribution functions, and help to reach adequate standards of governance and accountability. Public bodies and nongovernmental organizations can support such processes through encouragement activities, financial support, and training initiatives.
Logistics, infrastructures and facilities. Logistic issues are highly important and sensitive for economic sustainability and efficiency of SFSCs’ initiatives, as well as the availability of local infrastructures and facilities. At individual level, producers’ access to financial resources can be facilitated for improving the production equipment, logistics and marketing. At collective level, aggregating the supply of several producers can combine their efforts in feeding the market with a wider supply and ensure adequate volume and continuity over time. In this regard, food hubs can be a useful instrument, conceived as multifunctional and modular facilities integrating physical and online spaces and enabling the collection and aggregation of fragmented individual products’ supply within a supply chain or a territory.
Quality, traceability and labelling. SFSCs often require awareness and consolidation of the quality characteristics of the products exchanged, as well as an improved information flow between producers and consumers. It is often necessary also to improve traceability and make the product recognisable to final and intermediate consumers, which asks for the development of a collective branding of the product, through for instance collective trademarks and labels. As a complement or alternative to the direct product guarantee, specific forms of guarantee related to the belonging to a SFSC initiative can be developed, too (e.g., participatory guarantee schemes).
Targeting emerging SFSCs markets. Shortening the supply chain does not only mean a direct, physical relationship between producer and final consumer, but also a reduction of the geographical and trade distance between production and consumption. The short supply chain ‘market’ is highly segmented. Among the emergent segments to be addressed there are on-line platforms, whose consolidation requires strengthening the logistical aspects, without, however, forgetting the physical dimension of producer-user interaction. In addition, also public procurement represents an interesting opportunity for the development of SFSCs. Rural tourism and agritourism too can offer interesting opportunities for increasing the added value of on-farm selling. All these new emerging market segments related to SFSCs can offer interesting opportunities, but they also require the facing of new challenges, the introduction of innovations and the realisation of collective investments.
