When the Food Bank Loses its Business Model

Food banks are suffering from significantly lower food donations nationwide, as Lauren Etter reported in The Wall Street Journal in May, which is “the down side of a drive in recent years by manufacturers and retailers for greater supply chain efficiency [reducing waste and overstocks.”

To make up for the loss of donations of imperfect and overstocked food, Etter reports, “…food banks are seeking ways to raise money to buy more food. They are also looking for new types of food, including perishables. Some food banks are hiring trucks to pick up food directly from farms.”

If food banks are buying food, they are losing their business model at worst, and shifting it at best. In business parlance, their supply chain is drying up, although demand is as strong as ever. The logical response would be to find other sources of supply. But in a sector that is already undercapitalized, does it make sense that food banks necessarily find another source of food, even if they have to buy it, to meet demand? Aren’t they in a different business if they do that? Aren’t there others (like Walmart) who could source supply more effectively?

Sounds like prime territory for a series of social business enterprises between the food banks and the big retailers to me. (See my prior posting on social business enterprise.) Food banks can reach people even Walmart cannot, and can bring charitable funding to ensure they do so. But Walmart can surely get better deals on food than food banks can. Granted, this is an easy enough call from the armchair, I hope the experts will weigh in.

Carla E. Dearing

Comments

Hey Carla - interesting post. On the flip side there is quite a bit of press here in Washington DC in recent days that our big food bank - Capital Area Food Bank - has so much product they have outgrown their facility. And they are looking to the city to help provide a bigger warehouse. cycles I guess.
DC

Posted by: Donna

Actually, most food banks have good relationships with many food suppliers, so they can broker deals at (or even below) cost. Here at the Food Bank of Central New York, we can acquire about $10 worth of food for every dollar donated. Also, if we are purchasing some of our inventory instead of only stocking donated items, we are better able to provide healthy and nutritious food to those who need it most -- making sure our products aren't too high in sodium, saturated fat, etc., and providing all the many nutrients a person needs. Finally, buying produce from local growers has three benefits: healthier food for folks who can't always afford fresh produce; a longer shelf life than most donated produce; and strengthening the local economy, which helps everyone.

Carla:

As much as I can appreciate your application of a market logic to what appears to be an issue of supply and demand, I think this case might also show us where market solutions fail in solving social dilemmas like hunger.

Walmart could be a perfect partner in addressing hunger at the local level - but not necessarily in the way you describe. The fact is that hunger in this country is not because of a lack of food - it is plain and simply the result of poverty. Walmart employees and other low-income service employees who are piecing together a living from working 2 or 3 part-time jobs are the very same people showing up at food pantries. Really, Walmart (and big companies like Walmart) could play a more significant role in ending hunger by paying its employees a living wage - not by brokering better deals on food that then gets passed to food banks that then in turn gets passed to food pantries and shelters and then finally gets distributed to low-income Americans.

I am afraid that always applying a market logic to social issues might obscure our analysis of areas in which the market simply fails to meet society's needs. But if we are going to adopt a market logic I suggest that we also focus on questions of supply and demand for the individuals who have to rely on food banks, not just on questions of how to sustain the institutions that have sprung up around a system that's failing those individuals.

Posted by: Gabi

I think it is the height of hilarity to suggest food banks begin using Wal-Mart as their purchased food supplier. Wal-Mart already has a strangle hold on suppliers, now food banks should help them out? I don't think so. As people here have pointed out, food banks get prices well below general bulk pricing. But I agree that purchasing leads to a different business model. I don't see much realization of this in the food bank world though. Currently, pruchasing is generally a way to supplement donated food - as someone already pointed out too. Purchased food is generally of high quality nutritionally speaking. Also, new, innovative partnerships with smaller producers and retailers have been very fruitful and produced new avenues of better and fresher product. Of course, this presents new and unique challenges vis storage and transporation, not to mention distibution.

Overall, I'd say food-banking is changing, but so are many industries. I read the Wal Street journal article of May, and yes, food banks are struggling. But at some point, a peak is always reached. Food banks cannot simultaneously eliminate hunger while constantly increasing its distribution. This doesn't make logial sense. At some point they will hit capacity - food banking is not a constantly expanding "growth" industry. There are even those that would suggest any purchasing is counter productive. Personnally, I think food banks should be having these discussions - instead it is always "how do we get more food." So short-sighted...

Posted by: Eric E