Price Chopper’s Local Hub Model Sets Stage For Sourcing Safer Produce

Groundbreaking hub system standardizes and mitigates food safety and quality control issues, and expands local supply.

When Produce Business recognized Price Chopper’s Market 32 with its coveted Retail Sustainability Award in our May issue, we highlighted numerous ways the chain is reinventing sustainability. However, one uniquely intriguing and potentially industry- altering program warranted a more in-depth exploration. “This is what the future of local produce sourcing looks like — a sophisticated, go-to-market architecture to ensure GAP-certified, quality-controlled product; a model not just for our company, but for the entire industry,” says Joe Berman, manager of corporate social responsibility.

Rick Reed, vice president of produce and floral merchandising, championed this innovative system, a dramatic departure from the industry norm, where local farmers (many of whom are not GAP-certified) get access to supermarket produce departments without proper food safety oversight.

Countering this phenomenon, says Reed, Price Chopper has galvanized a network of food hubs that are already food-safety certified and many operate under far stricter standards than legally required. “All hubs are at minimum GAP-certified,” says Tyler Blance, marketing program coordinator – local. “Some are also SQF-certified, and others are in the process of getting SQF-certified. Price Chopper encourages enhanced food safety certifications and is working with each hub to continually raise food safety processes to the next level.”

Each of the hubs has inspectors who act as the gatekeepers for the chain. “We leveraged those state-of-the-art facilities as hubs for GAP-certified local growers to bring their products,” says Reed. “In turn, Price Chopper backhauls each hub’s collective volume to its main distribution center. Here the products, which have been consolidated from various growing areas, are inspected again more intensely for quality and safety, and consistency. Then from the DC, the inspected products can be distributed more widely and strategically to meet demand for local produce across the chain’s entire network.”

Produce Business ’ editors recently met with the chain’s executives at the Schenectady, NY, headquarters and engaged in dynamic discussions with Reed and other stakeholders on the genesis of the program, its transformative impact, and why it behooves other retailers and companies down the supply chain to determine whether the model fits with their own operations. “I’ve been in this business for over 30 years, and this was the biggest and most transformative project I have ever worked on,” says Reed.

In its ideal, the system is a collective win: increasing availability and sales of safe, quality, local produce to a broader swath of customers, opening new doors for local growers, improving logistics efficiencies, and reducing food miles as well as carbon footprints.

As is often the case in undertaking a sea change, there was some push back. Not all growers were enthusiastic about getting on board for various reasons, but thanks to the chain’s well-honed supplier relationships, there is an overwhelming willingness to partner through the learning curves in implementation, says Reed. In kind, Price Chopper is actively engaging in robust back-and-forth feedback with growers to resolve glitches and tweak the system.

Hub System Overview

The local hub process is managed through a sophisticated website portal (growershub.com), which allows real-time interaction between the growers and Price Chopper. “We put out there, ‘Here is what our demand is on a weekly basis; here is what our demand is going to be for a promotion two to three weeks out. …’ The growers respond, ‘Based on seasonality, this is what we think our yield is going to be; what our crop is going to be.’ We come to a lid price we all agree is right for the product based on availability, demand, etc.,” says Reed.

The upside to this dynamic interaction with a vast grower base is Price Chopper is able to find more volume, and more locally grown, says Reed. “The integrated system allows for distribution of a greater range of local produce items to more stores and more regions.”

Price Chopper’s six hub locations are: Pine Island, NY (A Gurda Produce); Syracuse, NY (Mento Produce); Albany, NY (Capital City Produce); White River Junction, VT (Upper Valley Produce); Burlington, VT (Reinhart Foodservice); and Hadley, MA (Plainville Farm).

“Before, local farm deliveries were isolated in pockets, with growers doing direct-store deliveries to the handful of units neighboring their growing operations. There is a local farmer here, and it can deliver to these particular stores here,” says Reed. “The reality is local sourcing is usually confined in silos and inflexible. Now with this spanned out infrastructure, we are able to satisfy the demand of the entire chain. For instance, we used to source a fair amount of product from New Jersey because our locally grown was basically targeted into the areas where the local growers could deliver,” says Reed. “Now, I’m looking from a 50,000-foot view. I’m stepping back and saying, ‘Here is our demand; here is what our overall volume requirements are going to be over a period of time. What do you have coming off your farms?’ Then we are able to bring more local product into our DC and distribute it throughout the chain.”

The model is so intrinsically different than the existing supply chain infrastructure. It connects so many parties that were prohibited from entering the market otherwise, or forced to overcome enormous barriers to integration, according to Berman. “What if this hub system was developed collaboratively on a national basis, through whatever mechanisms were necessary, and the functionality of these hubs was replicated? Just imagine what that new infrastructure would do to the national food dialogue relative to the accessibility of local food products and food safety,” speculates Berman.

“Neil Golub (executive chairman of the board), Jim Baldwin (manager of food safety and sanitation), and I met with Commissioner Richard Ball and other folks at the New York State Department of Agriculture,” says Reed. “They were very intrigued by this mechanism to ensure food safety of local growers, because the state actually fosters these farmers markets, and they are starting to realize there is a lot of risk. There hasn’t been a systemized mechanism to know who is certified and who isn’t, or for traceability.”

“When we sat down and started to have conversations around local agriculture in New York State,” continues Berman, “the single biggest barrier to market penetration for local agriculture producers is: How do you address issues of food safety, quality and oversight? This is a recognized market barrier New York State has been endeavoring to overcome for a long time. From a private commercial perspective, we know this infrastructural approach works, and there may be ways to expand this particular model and to help enhance it even outside of our trade footprint,” says Berman.

Exemplifying the heightened need, and recognizing the challenges small producers face in complying with food safety standards, USDA’s Agricultural Marketing Services (AMS) division launched GroupGAP. “Under the GroupGAP program, growers of any size — as well as established grower groups like food hubs and other marketing organizations, and even research and promotion programs — can be USDA GAP-certified as a group,” AMS reports.

The cornerstone of the program is to make USDA GAP certification “accessible and affordable for all growers by sharing resources to meet the requirements of both the USDA GAP program and their buyers.”

GroupGAP also is geared to verify compliance with the on-farm food safety requirements of the FDA’s Food Safety Modernization Act. AMS reports it is “already working with many different buyers in the retail and foodservice communities to promote acceptance of GroupGAP, and all of the food safety audit-based programs we offer.” USDA’s AMS effort to get all growers big and small GAP-certified goes well with the Price Chopper local hub model.

Breaking Down Barriers

Part of Price Chopper’s hub system strategy involves advocating, facilitating and providing the necessary food safety resources and training to local growers, and just as important, doing the follow-up verifications. “The administrators of the hub actually check on where growers are in the process and where they need to be. It is really a whole process to get more growers GAP-certified,” says Reed.

“I think this system fundamentally changes the relationship dynamic between us and the grower community, when we step in as a resource provider and an educator, and when we talk about what trade partnerships should look like,” says Berman. “It deepens these stakeholder-driven business collaborations and makes them richer and longer-lasting.”

“These become meaningful partnerships,” agrees Reed, pointing out some grower relationships 50 years in the making. “Those already cemented partnerships also help ease the transitional period and ward off any resistance toward change.”

Gaining Control Over Packaging and Labeling

“One of the other benefits to the food hub system is it enables us to control the packaging and know we have the proper cartons,” says Reed. “We were getting things delivered directly to the store that were in old banana boxes. Who knows what has been in them and potential issues with cross-contamination? In addition, the system allows for labeling standardization.” “Before this hub system, there was really no quality control,” says Reed. “Growers got product to the back door of the individual store, the store pushed it, and that was it — we were stuck with the quality being good, bad or indifferent.” Individual stores got used to having the local farmers in their narrow community pockets delivering directly. Sometimes with the ability to pick product early in the morning and get it to the store later that same day. “There is some romance to that,” acknowledges Reed.

However, that romance dissipates when there is no temperature or quality regulation and that product could be sitting out for several hours losing shelf life on the back of an unrefrigerated pickup truck, explains Pat Iannotti, director of shrink administration for Price Chopper.

When the hub system was first getting underway, Iannotti was a zone director responsible for all the stores in Vermont, where Mazza corn (picked fresh from the Sam Mazza farm in Colchester) was an iconic seasonal mainstay. “The folks in Burlington love Mazza’s corn, so when it went from his farm direct to our Burlington stores, it was a great thing,” Iannotti explains. “Now we’re shipping Mazza’s corn from a Vermont hub to our DC warehouse in Schenectady, NY, and then that corn is going to be shipped back out to all of our stores.”

Price Chopper strives to ensure every store in the company gets the best local produce, guaranteed to be GAP-certified, and inspected to meet standardized quality specifications.

“As I came here [to headquarters] to help execute the program on a company-wide scale, I saw how the whole thing worked with a different set of eyes, and that it was much better for us as an organization,” says Iannotti. “We make sure every store in the company gets the best local produce, guaranteed to be GAP-certified, and inspected to meet standardized quality specifications.”

If you are the produce manager and a grower brings you 10 bags of corn, you’ll open up a bag and taste it, but are you doing quality control like they would do here at the warehouse? “No,” he explains. The system also has strong mechanisms in place to alleviate cold chain disruptions, which intertwines with shelf-life and shrink.

When expanding distribution of local produce, are there any limiting factors on where it can be marketed by state, region or commodity? Reed says the answer to that is yes, and no. For vegetables in general, there are no real distinguishing factors. “Nobody cares whether it is a New York zucchini or a Pennsylvania zucchini; corn, on the other hand, is a different story,” says Reed. “For the corn, we do have several different slots, five or six to meet consumers’ local preferences; Vermont corn, Massachusetts corn, New York corn, etc. We also market locally grown corn more generically to expand availability, and that goes out to a big portion of our network. It is not easy managing inventory, let alone managing inventory for all the separate slots.”

There is a cursory inspection at the hub, so the hub operators are not getting into full-blown specs, explains Reed. “The hubs make sure product is in the right box with the right label, and the temperature is within the range we desire,” he says. “When we started this system, we knew we couldn’t go from somebody’s shed that is unrefrigerated to USDA specs, and we figured that in, because we didn’t want to establish a spec that just couldn’t be hit.

“But we tightened down the requirements a little bit,” Reed continues. “We brought in all the growers to introduce the system, and of course there was some uncertainty of compliance, but GAP certification is absolute. We can’t shoulder that risk. The hub is more or less a consolidation point for the local product growers drop off. A couple of hours later we are getting it into the DC for a full-blown inspection with our expert Quality Assurance team.

Grower Perspectives

There are pluses and minuses to everything. “I’m a realist,” says Tony Pellegrino, principal at Pellegrino Sales and Marketing in Troy, NY, and also a founding partner of Growers-Hub.

It depends on your vantage point. For some growers, competition has increased. They may have owned the supply/demand quotient in their area because other local options hadn’t been available. For growers already invested in GAP certification and refrigerated trucks, delivering direct to stores (and in some cases also to Price Chopper’s warehouse), their competitive advantage might be undermined by the now-equal playing field. “Prior to going to this hub system, we delivered direct to each of the chain’s stores in our vicinity,” says Larry Eckhardt, owner of Kinderhook Creek Farm, in Stephentown, NY. “We’d get a daily order the night before or early that morning. It certainly was very personal, and we had relationships with seven or eight stores. It worked very well for us. But had drawbacks for Price Chopper,” he says.

Product was not consistent through the entire chain: size, quality, delivery methods and pricing was hard to control. “Not hard for us, but from a chain standpoint, it became cumbersome and disjointed. Some stores had abundance of supply and others hardly any. Price Chopper wanted a way to get product fresh to all stores,” Eckhardt says.

On the plus side, Eckhart says logistical issues in having to do so many separate store deliveries has diminished. “We’d get to a store to unload 20 cases of corn and have to endure long wait times at the back door behind all the other trucks that needed to unload products. Meanwhile, our product was sitting on the truck and we needed to deliver to five more stores,” he says. “With this hub system, we make one delivery to the Albany hub.”

“We thought with the hub system, we’d be featured in more stores and see a noticeable increase in our volume, and it hasn’t happened yet, but the hub system is relatively new, and Price Chopper is still working the bugs out of it,” says Eckhart, adding, “our volume has creeped up, so maybe our expectations were too high with the learning curve. Price Chopper and the smart growers realize this is a partnership, and it is important to work this out together,” he says.

“We’re kind of unique from a grower standpoint,” says Brian Reeves, owner of Reeves Farms in Baldwinsville, NY. “Price Chopper started the hub system primarily to replace direct-store delivery, but for quite a few years, we did business through Price Chopper’s warehouse and also direct delivery with 15 stores. It was a good-news-bad-news scenario for us.

“We already had the trucks with the refrigeration capability, and we had third-party food safety certification for years,” he says. “Our hub, [Syracuse, NY-based] Mento Produce, is closer to our company (only 20 minutes away). Now Price Chopper picks up our produce at the hub and takes it to their warehouse, which is more convenient. Before it was a little like herding cats; I do not miss dealing with those 15 different stores all the time.”

Reeves continues, “To the growers that are smaller or have logistics issues, they could expand through this system. But in our case, we shrunk a bit, because what we brought separately to the warehouse is down some 10 percent; but we gained back volume and hopefully some more this next year.

“When you institute a new method, it takes time to adjust,” says Reeves. “Price Chopper is open to suggestions for making the model better. In some ways the hub system made more competition for us. They took a bold move, and with it comes growing pains. I think it also says something about Price Chopper, in referring me to speak with Produce Business, for this article. They know I am honest and upfront, just like them, but that is why they are such a good partner.”

Forward Thinking

“This year we’re trying to do more with Price Chopper, and build our infrastructure,” says Pellegrino. “We’ve received interest in GrowersHub from various companies, including Wal-Mart.

“We have to walk before we run, and get it right for both the growers and the retailers,” he continues. “This will require adjusting the model to different customers. Price Chopper had a far-reaching vision. I think the growers hub system is the future, and the sky is the limit on enacting that vision.”