Firsthand Foods started with a kitchen on wheels selling sausage sandwiches made from pasture-raised pigs raised on nearby farms.
But instead of evolving into a roving brand or a restaurant, the company’s owners used the Sausage Wagon as a starting point to assemble a farm-to-table pipeline that connects farmers to customers seeking local pork and beef raised humanely on pastures without hormones, antibiotics or animal by-products.
In addition to the food truck, Firsthand Foods co-owners Tina Prevatte and Jennifer Curtis have used grants, relationships and trial-and-error to serve as the middlemen in a system that buys whole animals from small-scale farmers and processes, labels, markets and transports them to restaurants, grocery stores and institutions.
Firsthand Foods allows farmers to raise pigs the way they want to raise them, without hormones or antibiotics and fed with grain mostly grown on their farms, and not have to worry about marketing and related hassles, said Jeremiah Jones, who owns a farm in Beulaville and is president of the N.C. Natural Hog Growers Association, which has about 33 members.
“They don’t want have to go out to the farmers market,” Jones said. “They don’t want to go out and make deliveries of meat, and they don’t want to go out and build a relationship with a chef.”
After five years, Firsthand Foods broke even in February. While five years to break even may give some small-business owners heartburn, Prevatte and Curtis know their situation isn’t unique thanks to a first-of-its kind study released this week. It shows that across the country the typical food hub operates at a 2 percent loss.
“It is sort of a sanity check for me,” Prevatte said.
Food hub study
Firsthand Foods is one of 300 regional food hubs using various methods to serve the wholesale end of the local food business. The study defines food hubs as organizations or businesses that manage the gathering, distributing and marketing of products from local and regional producers.
The study provides insight to lenders and grant organizations in an emerging sector of agriculture, said Gary Matteson, vice president of Young, Beginning, Small Farmer Programs and Outreach for the The Farm Credit Council, a national trade association for its cooperative lending institutions. The council conducted the study with the Wallace Center, a Virginia nonprofit that helps communities and entrepreneurs establish new food systems.
The take away, Matteson said, is that food hubs are high-volume, low-margin businesses. But some are making it work.
Organizations with sales greater than $1.5 million averaged profits of 2 percent. Companies that were in business 5 to 10 years averaged a 1 percent profit.
That’s good news for Firsthand Foods, which expects to bring in $1.5 million in revenue this year and is currently connecting 60 farms in Eastern North Carolina and the Piedmont to about 100 different customers, mainly in the Triangle.
Along the way, the business has received more than $976,860 in grants from mainly agricultural organizations, such as the N.C. Tobacco Trust Fund Commission and the U.S. Department of Agriculture, to help establish and execute its business plan and buy inventory.
Firsthand Foods was born after Curtis, project director at NC Choices, and Prevatte, a UNC business graduate student, connected in 2008.
They started with the Sausage Wagon in October 2010, selling sausage sandwiches made from local hogs, boosted by the popularity of food trucks and eating local. The truck allowed them to start to build the wholesale pipeline and enter the wholesale market in the spring of 2011, connecting products from 15 farmers to a dozen clients, mostly restaurants.
When the company filed a trademark application for the name Farmhand Foods, a subsidiary of Smithfield Foods claimed the name was too similar to its Farmland Foods. The food hub planned to fight, Prevatte said, but decided it wouldn’t be an effective use of its money.
In 2013, they participated in a pilot project at a Lowes Foods in Pinehurst. They quickly learned mainstream grocery stores weren’t a great fit.
It was difficult to stand out among the many brands, Prevatte said, and Firsthand had to buy back any unsold product at the full retail price.
“That is not a sustainable situation,” she said.
By 2014, 63 percent of sales were to restaurants and caterers, 19 percent to retailers, 15 percent to institutions, including UNC, and 3 percent direct sales. They also sold the food truck that year.
The company is finding success with smaller grocery stores, including the Durham Co-op Market, which opened in March.
The co-op, Prevatte said, is willing to work with them, which is key for a wholesale company that buys whole animals.
Success at the Durham market has sparked interest from other grocery stores in Burlington, Greensboro and Hickory.
Leila Wolfrum, the co-op’s general manager, said Firsthand allows it to buy local meat without the logistical or consistency challenge of buying directly from farmers.
“People come to the co-op because they know that we will be interested in choosing products and selecting products that really maintain that kind of values,” Wolfrum said.
From the report
The Wallace Center and The Farm Credit Council found that the highest performing 25 percent of food hubs made a 4 percent profit in 2013, but the average food hub operated at a loss. On average, food hubs had 55 vendors, served 408 clients and drew from farmers within 385 miles. To view the report, go to http://bit.ly/1HMLGxe.