Local Food Economies

When learning economics, one of the first lessons most people receive is about supply and demand. When a product or service is in demand, businesses (and sometimes governments) work to meet demand by supplying that service or product. In the case of local food, the growth of local food marketing channels and the growth of local food as an economic and community development tool is fueled by demand from a consumers and citizens across the country. Demand for local food has been shown in national reports, the number of local food marketing channels, the reaction by retailers, and new local, state, and national policies.

Nationally, there have been a few estimates about the total demand of local food. One industry group estimated the local food sector to be valued at $4 billion in 2002, $5 billion in 2008 and $12 billion in 2014. They forecast local food sales to be worth $20 billion by 2019. Another estimate from a USDA report titled Trends in Local and Regional Food Systems valued the local food sector in 2012 at $6.1 billion.

Though it may be difficult to pin down a precise number on the demand of local food, it is simpler to see the supply side of demand. The growth of CSAs, farmers’ markets, food hubs, farm to school programs, and the presence of local foods at restaurants and grocery are all supply side indicators of the local food sector. In the graph below, we can see the growth in the marketing channels for local food.

Local Food Market Channels Growth

As consumer habits change to buy local food, these new shopping and spending patterns have driven traditional food retailers and distributors to change too. From Meijer, Marsh, and Kroger to Sysco and Piazza Produce, these older companies now offer products that can be traced to local sources. As consumers drive this change, it gets the attention of businesses seeking to satisfy customer demand. There are several causes behind the shakeup of the food retail environment and the desire for local food is one of them. In a recent Deloitte report for the Food Marketing Institute and the GMA: The Association of Food, Beverage, and Consumer Products Companies, shows traditional consumer preferences of taste, price, and convenience are now accompanied by consumer preferences like experience, safety, health & wellness, and social impact, which includes local food.

New entrants in food retail include many local food marketing channels. Food hubs are challenging distributors by offering food aggregated from local farms. Retailers are being challenged by new direct to consumer products like online CSAs, local meal-kit delivery, and retail-oriented food hubs. Increasing access to information through the creation of local food directories improves consumer knowledge of local farms and markets.

Further contributing to the growth of local food are federal, state, and local government policies, programs, and funding. Farmers’ markets often operate in parks or on city streets through the cooperation of their local government. Many cities like that farmers’ markets have been shown to increase sales at nearby businesses. Farmers' Markets and the Value ChainAt the state level, branding campaigns, like Indiana Grown, are more common. States can also make it easier for schools to get local food by changing policies to favor local producers.

The federal government has had a large push called Know Your Farmer, Know Your Food (KYF2). It started in 2009 and is a push to develop local markets, access to healthy foods, and the rural economy. While the KYF2 initiative doesn’t have any dedicated staff or funding, it was a way to gather USDA’s resources in a way to highlight how they can help local and regional food systems meet consumer demand.

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