Producers of vegetables, fruits and traditional products from the Food Hub, a program launched by the Romanian American-Foundation to support small entrepreneurs in agriculture, will register revenues around $600,000 this year, almost double compared to 2019. This increase is determined by the advance of online orders as a result of the Covid-19 pandemic, but also by the change of sales and marketing strategy.
Food Hub is a program launched by the Romanian American Foundation (RAF) in 2017 based on similar models from Philadelphia and New York. The program consists of supporting through financing and training four centers (food hubs) that collect and sell the products of small agricultural entrepreneurs from four areas: Câmpulung Moldovenesc (Bucuvina), Cluj-Napoca, Iași and Odorheiu Secuiesc. Each of these four hubs is a social enterprise and is coordinated by an NGO. The entire program is under the guidance of the Civitas Foundation for Civil Society – Cluj-Napoca branch. The four hubs are: Nod Verde (Cluj-Napoca), Cumsecade / Helyénvaló (Odorheiu Secuiesc), Roade și Merinde (Iași) and Nord Natural (Câmpulung Moldovenesc).
The four food hubs collect products from about 1,200 entrepreneurs
The hub network recorded total sales of about $325,000 last year. For this year, the RAF’s representatives estimate revenues around $600,000.
The four food hubs aggregate about 1,200 producers: fruit and vegetable growers, producers of traditional foods based on milk, meat, fruits and vegetables. Most of them are young entrepreneurs, up to 45-50 years old.
“We thought of the project as a long-term economic opportunity for small producers in rural areas. Our support consists not only in financing food hubs, but also in preparing producers to meet the consumer requirements. We all want food hubs to become sustainable as every food hub helps small producers update their recipes, teaches them to promote themselves, provides them with consulting and training. In turn, each producer can become sustainable in the long run. Thus, we can create a business model that can be scaled across the country to support other small producers who need such collaboration”, says Oleg Moraru, coordinator of rural economy programs at the Romanian American Foundation.
A $1,5 million investment
The best-selling products vary by area and season. While in the summer fruits and vegetables are best sold, local products predominate in the rest of the year (meat products, cheese, jam, honey, “zacusca” – aubergine stew, etc.).
Most of the clients are women between 25 and 45 years old, with children and interested in the family’s food quality. With the increase in the number of online orders, there is a diversification of customers by age categories.
RAF’s investment in this program is about $1.5 million: $1.1 million was allocated for 2017-2019, while for 2020-2022, the funds allocated are about $0.4 million. RAF does not directly fund farmers or small businesses, but foundations that coordinate hubs according to an agreed business plan. All food hubs are social enterprises, their shareholders are the NGOs that set them up.
Starting this year, each food hub also has an online and physical store, except for the center in Cluj, which considers opening a physical store in the next period.
The state of emergency has increased online sales by 400%
“Until this year, only two food hubs had significant online sales nationwide. The pandemic brought them a fourfold increase in orders during the emergency state, which led us to re-establish our business model. We adjusted the marketing and sales strategy, and since the summer, the online stores of the centers in Cluj and Odorheiu Secuiesc have expanded their distribution nationwide. At the same time, the centers in Iași and Câmpulung Moldovenesc have opened a local store. Thus, the entrepreneurs had access to sell and promote their products on a new business channel. This was an essential step, especially in this challenging period and with fluctuating decisions in terms of trade”, states Anna Șargov, project coordinator for the food hub network within the Civitas Foundation for Civil Society Cluj-Napoca.
RAF estimates that the online environment will represent up to 80% of sales, compared to 70% in 2019, this increase being recorded even in the context in which the offline network has grown from one physical store to three.
A new line of development: gift packages bought by companies
Given the growing demand for local products, RAF and Civitas want to develop a new business line in order to attract customers from companies. More precisely, they want to create standard packages that can be offered as a gift to employees and partners. The packages might contain local products such as syrups, honey, meat or cheese foods, homemade chocolate, herbs, craft beer, brandy, Szekler products, Bucovina or Transylvanian products.
“We want to replicate the model launched by Nord-Natural, the center in the Bucovina area that in the last two years has expanded to the corporate area by creating standard packages that can be offered as a gift. A package costs, on average, 100-150 lei. This line of business carried out by Nord Natural has big development potential and can contribute to the increase in sales, especially during the traditional holidays. We already have corporate customers with over 100 employees and who buy these packages to give them to the employees as a gift for birthdays or holidays. We estimate that next year the corporate area can represent around 10% of the total sales of the network”, adds Oleg Moraru.
The biggest challenges for most producers are the rapid distribution of products (maximum 24-48 hours), portfolio diversification and permanent product quality assurance.