TAKE-AWAYS

  • The traditional distribution model—aligned with regenerative values—may be the best way forward to achieve a viable regional food system.
     

  • Values-aligned food distributors should cooperate more across regions for the greater good of local food systems. 
     

  • A regenerative food distributor by definition is one that supports the farmers in its network.
     

  • The market for processed, regeneratively produced foods has room for significant growth.
     

  • Fair farm labor practice is the next big issue the local  food movement must address if it is to be truly regenerative.

TALKING WITH Kate Galassi
of Hudson Valley Harvest *

Contributor: Susan Arterian Chang

Kate Galassi got into food through farming – driving an old Allis-Chalmers G to help with harvests on a small organic New Hampshire produce farm. “I always had the itch to work in restaurants,” she reports, “so when I got the chance to be the produce buyer for The Spotted Pig in New York City I jumped at the chance. By dumb luck I realized that my real talent is speaking the language of the farmer and speaking the language of the chef. Being a bridge between those two communities has been so rewarding. The goals of the farmer and chef are often at odds and yet when you can get them to line up the result (and huge sales potential for farms) can be magical.” 

 

Kate was the founder of Quinciple, a CSA-in-a-box food delivery system, sold to Farm to People in 2013; and thereafter became Director of Purchasing and Farm Projects for Natoora, a fresh produce supplier to restaurants.  She joined Hudson Valley Harvest as its Director of Sales & Merchandising in January 2019 and in April became HVH's President.

 

*Update since we posted this interview: Kate recently assumed the role of Sales Consultant & Purchasing Administrator at Myers Produce.

You have come to believe that the best distribution model for the regional food system is a more traditional one. Can you explain?

KATE GALASSI:

 

The big thing I have been thinking about is how to put in place resources that help farmers plan better with the level of uncertainty they have to deal with. I think in some ways it has led me to believe less in new business models and wanting to work in kind of a more old-fashioned distribution way.

 

For example, Quinciple was this brand new model of a curated CSA delivered to your door.  At the time we launched meal kits were not really a thing people were talking about that much.  We didn’t think we even had to define ourselves in our relationship to meal kits and then we got totally crushed. We couldn’t raise money because everyone was investing in Blue Apron and Plated. We sold rather than go out of business.

 

Initially as a local food movement was gaining steam when I started ten years ago, everyone was talking about food hubs as a way to cut out traditional middlemen distributors.  Everyone viewed the traditional distributor as a kind of sketchy, compromised person in the middle taking a margin on everything.

 

These food hubs and aggregators were saying, I will be just harvested to order, the farmers will pick what was already sold, and we won’t have to store anything in a warehouse. It seemed very attractive and then the reality 10 years later is no restaurant wants to order 3 days in advance and even that is not a long enough turnaround for a farm to pick those orders. That isn’t a reasonable business model.

 

There are so many things that are attractive about traditional models: having an investment in a warehouse and infrastructure and a fleet of vehicles and a big team to properly market the product and provide customer service to the end customer. So I am working harder to make our business resemble traditional distributors as much as possible because that is a way to be more sustainable business.  

 

The local food movement originally thought it could divine a new business model for distribution based on small independent distributorships but the harsh reality was that [many of the other] models don’t work as well as traditional distribution. And traditional distribution requires real scale to be profitable.

You believe regional food distributors are currently working suboptimally?

KATE GALASSI:

There are all these regional distributors—Myers Produce in Vermont and Finger Lakes Foods in Ithaca, Local Bushel in zone 7 in NJ and Lancaster Farm Fresh in Pennsylvania. They are very isolated regions and I feel like that imposes limitations on what we can do. I would like to see way more regional distribution, pulling food from northern Maine to Central PA and occasionally further south, having that full breadth coming into New York City through a single distributor would be amazing.

 

Right now HVH is focused on farms in Hudson Valley but everyone in central New Jersey and Pennsylvania has everything a full month earlier than we do—from sweet corn to tomatoes—so it makes it hard to stay competitive. Not to mention when there are weather problems—Hudson Valley had horrible rain last season and that was true of a lot of the northeast but they were having a drought in Vermont so they were having very different problem. So if we pulled from a larger region that would make us much more stable as a business.

But how do you see that growth staying aligned with a regenerative distribution business? How would you see that growth trajectory being different from a Sysco or one of the other big players? If you are just operating in the same large region as they do, what would differentiate you from those traditional distributors?

KATE GALASSI:

I think there are a few basic things. For me to it is really about being a farm-centric business. Complete transparency— that was how we worked at Quinciple and Natoora and now HVH— no product connected to a farm is sold independent from its source. It is a very important idea and has a lot of power for the end customer and it is something we can do to support farms and push forward the visibility of local food.

 

Also traditional distribution can be very punitive of suppliers. When they bring on a new chain of grocery stories the stores want all of the shelves filled for free, it is called free fill first time around, and the distributor is forced to do it. They might get 300 new stores but it might cost the small packaged good producer five or ten thousand dollars to get that account.  Then the new distributors force them to provide discounts on a quarterly cycle. They use that discount to stock the warehouse and then order nothing when the price goes back up to full price.

 

Those traditional distribution practices are incredibly manipulative and punitive for farmers and small food producers and we don’t engage in any of those practices. In another example, if a farmer delivered something to a traditional distributor and it is not up to spec not only does the distributor throw it out and not pay the farmer they might even charge a disposal fee for the trouble of getting rid of the product. So if you are a farm wanting to sell wholesale all of those traditional distributors are incredibly costly to work with.

 

I do a lot of crop planning with farms usually starting November and  December, planning for the upcoming year.  The farmer will be saying what should I grow and I will be providing sales data and guidance based on what I think will be popular. We then make contingency plans, what happens if you can’t meet my demand or what happens if my demand is not what I predicted? We are thinking through those worst-case scenarios as collaborative partners. It is really important because small scale agricultural farms 10-50  to100 acres are so susceptible to real impacts from weather damaging their crop plans. So figuring out how to work through those tough times are important.

What kinds of contingency strategies do you come up with working with farmers?

KATE GALASSI:

A lot is being creative and flexible. Products that have cosmetic insect damage, you  might not be able to sell them in the way you had originally intended to, but you might find a processor for them that does jam or juice or something like that. So it is helping them recoup some of that cost.

 

You might be able to launch a marketing campaign, say these potatoes have damage on the skin so we are offering them for a 20 percent discount but once you peel them they taste and look great. It is about educating your customer and getting their buy in, and sticking with farms through these kinds of things.

 

And then it is being willing to sometime take on other risks. So for us as a distributor we purchase from the farm and then sell to the restaurant. If the restaurant rejects that product based on quality sometimes we may go back to the original farm and ask for a credit so we don’t pay for it ourselves but sometimes we don’t. It is deciding when and where to shoulder the financial burden of customer refusing an item. A lot of that is about real relationship management.

We know that part of risk management for the distributor is finding creative ways to process fresh produce that can’t otherwise be sold as fresh.  But we understand there are not enough processors to service this emerging risk management model for local distributors.

KATE GALASSI:

Absolutely. As we see a huge influx of these small food brands and more food service people wanting frozen or cut or processed ingredients there is a huge market for that to happen more. But it is incredibly capital intensive to do that kind of processing. I used to be friends with a guy who ran a frozen popsicle business in Brooklyn made almost exclusively from local fruit. He wanted to buy frozen fruits to make raspberry popsicles all year long and had incredibly hard time finding frozen fruit from local sources. I think there is a market for it but a lot of people don’t know it should exist so they are not even asking for it.

So it is a local  market in its infancy.

KATE GALASSI:

Yes also the copacking market. There are some traditional copackers but there are starting to be some new ones that specialize with working with smaller food brands  and premium ingredients and I think they will happen more. For example, I think of Canopy Food based in Pennsylvania. The CEO Elly Truesdell used to be a food buyer for Whole Foods specializing in local brands.

It seems like you consider one of the biggest challenges to the sustainable growth of the local food market to be the fragmentation of the regional distribution market.  Do you think we need more consolidation or a better networked system for the smaller distributors to address that?

KATE GALASSI:

I think it would be better for it not to be one company. For me the dream would be to have a permanent resource that lived on line that was a comprehensive directory of all the distributors in the country—because regions overlap. And to know which distributors  are working where and with what farms and serving what cities and where they run trucks, on which routes.  I think more and more these small-scale distributors end up trucking food from farmers and delivering it to competing distributors.  

 

A comprehensive  map with all that information would be incredibly useful and if done in the right way would be a resource for buyers to find what they are looking for.  Large chains like Blue Apron and Sweet Green— fast casual to meal kits to grocery stores—all have purchasing departments but if you are a small enterprise you maybe have one person buying or it is a part-time role. If you want to find something it is hard to figure out how to get that product delivered to your door. So I think that would be really important moving forward.

 

We could begin to start to generate data locally about how many pounds of radicchio are we growing and how far short of demand is that. That is the biggest missed opportunity.  We have got all these businesses, meal kits and fast casual and small independent grocery stores that want to buy and sell local food and restaurants that want it for the quality and because their customers are asking for it. But the barrier to get it is so much harder than ordering from Sysco and there is no reason it should be.

How can you vet the distributor to be sure that they are truly delivering locally sourced food and are ethical in their practices. Could there be a way to do that?

KATE GALASSI:

For me in a perfect world they would get rated by the farmers they work with, a kind of Glass Door for distributors if you will.  I have been on both sides I have been a buyer for restaurants and I  have work for distributors so I have collected a lot of information over the years in a casual way. Farmers tell these really horrifying stories about being paid late or seeing horrific warehouses and OSHA violations. They are whom you want to review and categorize the distributors.

 

My biggest point of advice for farms is to diversify their revenue streams and part of that means working with multiple distributors. For some farmers it can make a lot of sense from a business perspective to engage with distributors who are not engaging in regenerative practices.  I think that for where we are right now farms have to do that and that is an uncomfortable reality.

We know we also have to address, as we build a regenerative system, not only how the food is being produced on the farm but how the farmer is treating labor. Are we ready to go deeper into those issues?  Farmers often say they can’t pay because they will go out of business. How pure do you have to be on that end?

KATE GALASSI:

I think that farm labor is probably the next big issue. I hope it is the next one that captivates people in the same way that local and organic has. I think its really important issue and traditionally been really taboo to talk about it. One of the weird dynamics in the Hudson Valley is many of the farm owners are old white men and most of the laborers are not and there is  a mix of H2A workers on the ten-month ag visa and undocumented immigrants working on farms. 

 

Either you go the route of certification across the board, which means  third party audits, or you will be relationship-based and transparency-based.  For me transparency should be around everything—I would like to see us move as an industry toward transparency when it comes to pricing and margins, which is another really taboo subject. I think the labor issue is very hard because what are the questions you ask or the standards you set to be sure labor is treated fairly?  For me I try to visit farms I work with and meet the people who own them and see the farm and meet farm workers and get a sense of how that works. But that is hard too.

 

I don’t really have a good answer. A lot of it for me is I think that there are farms that are vocal advocates for their workers and on immigration issues. Wherever possible I try to prioritize working with those farmers. And actually one of the really great synergies in this industry is that the people we are buying from and the ones we are selling to are both based on immigrant labor and there is a lot of overlap in those communities. In a perfect world we would see more distributors investing in those kinds of  issues and being an advocate for those communities.

 

I sit on the farmer community board that advises Greenmarket in the city and one of the issues we have gotten involved in is New York State overtime laws Traditionally pretty much all over the country agricultural workers have some kind of exemption for overtime. It varies state by state but New York is tightening those exemptions and they have in some cases really intense ramifications for farmers if they have to pay more overtime.  It is a really complicated issue and there are certainly workers who are taken advantage of when it comes to that. But also most of the farmers I talk about with these issues are providing housing for their staff, sponsoring their visas, and are keeping them hired through the winter so they don’t lose that labor and don’t have to rehire in the spring.  They are much more holistic employers than traditional minimum-wage-job employers, so that is a real minefield of an issue too.

 

What is interesting is a lot of farm workers have come out opposed to the proposed law saying if my boss has to pay me overtime the farm will go bankrupt. That has been for me really interesting, to see farm workers come out and speak against that.

Are you making efforts to distribute into urban areas that experience poor healthy food access?

KATE GALASSI:

One of the things I want to implement is a standard HVH discount toward customers working on food access issues. It is something I feel passionate about personally. Those are potentially customers who are willing to be flexible and I would rather develop a whole host of customers where I am providing something of a discount on what they order regularly. Thinking creatively about how that would fit into a business model is really important.

© 2018 by Hudson River Flows. 

For more information about Hudson River Flows contact arterianchang@gmail.com

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