Fueling Vibrant & Resilient Communities Through Local Food Systems

March 16, 2023

By Janie Moore, Entrepreneur Fund Director of Impact & Strategic Initiatives

Figure 1: Core components of the local food system.

Limited Access to Healthy Food in Rural Minnesota and Wisconsin

Imagine for a moment a geographic community. Picture in your mind the key attributes to that community. As you mentally walk down the streets, what elements enhance the vibrancy or resiliency of the community? What elements detract from it? What draws you to either live in that community or spend time there? What makes the community livable?

Whether you’ve pictured a community as a neighborhood within a city or a small rural town there are likely key attributes such as schools, parks, grocery stores, small businesses that you’ve also imagined that make up that community. The fabric of each unique community is woven together by a myriad of factors that allow people to live, learn, work and play there and the strength and vibrancy of that fabric is impacted by these factors. A foundational element in any community is access to healthy food, which is often impacted by large-scale food systems (i.e. corporate supermarkets, gas stations, national distributors, mass-produced food, etc.) and local food systems. When a community or a significant amount of their residents has limited access to food retailers that sell healthy foods, a core piece of their fabric is missing, creating what’s known as a food desert.

Food deserts are areas in which people have limited access to healthy, affordable food due to a lack of grocery stores, farmers markets, or other sources of fresh produce. In rural Minnesota and Wisconsin, this problem is especially prominent due to the limited availability of transportation, low incomes, and food insecurity. According to the USDA, nearly 11.1% of rural Minnesota households, and 10.8% of rural Wisconsin households lack access to a full-service grocery store, putting them at a greater risk of food insecurity than their urban counterparts. In Figure 2, the map shows census tracts throughout northern Minnesota and Wisconsin that require traveling 10+ miles for 33% or more of the residents to access healthy foods. While it’s not feasible, nor our goal, to eliminate all food access issues, there is a major role for small businesses in building and sustaining local food systems as a part of the larger scale food system to strengthen the fabric of the communities and region.

A map of Census tracts throughout northern Minnesota and Wisconsin that require traveling 10+ miles for 33% or more of the residents to access healthy foods.
Figure 2: Census tracts throughout northern Minnesota and Wisconsin that require traveling 10+ miles for 33% or more of the residents to access healthy foods. Source: USDA Food Access Research Atlas

What is a local food system & why are they important?

A local food system is a network of farmers, suppliers, distributors, retailers, and consumers who are all connected through the production, distribution, and consumption of food in a particular geographic area. This system can help to create healthier, more sustainable, and more equitable food production and consumption practices, which can contribute to the overall well-being of the community.

Figure 3: Graphic of local food systems as a part of the larger scale food system.

These systems are vital to the resilience and growth of local communities for four core reasons.

  1. Local food systems help to support local businesses, grocery stores, farmers, and producers, providing employment and economic benefits to the community.
  2. Local food systems provide fresher and healthier food options to communities, as they are picked at the peak of ripeness and don’t need to be preserved for long-distance transportation.
  3. These systems reduce transportation costs and emissions associated with shipping food from long distances. They also provide opportunities for communities to build resilience and adapt to changing environmental and economic conditions.
  4. They create stronger connections between farmers and consumers and often allow communities to preserve local traditions, foods, and recipes.

Why invest in locally owned grocery stores?

As you go back to imagining the landscape of a community and the elements that make it livable, there was likely a store of some kind in the picture and often, this store had a corporate logo attached to it. If these large-scale entities have figured out how to efficiently provide access to groceries, gas and more, even in rural communities, why should we then invest in local grocery stores? Shouldn’t we just try to get more of those corporate groups to come in? While we don’t refute that corporations have an important role in the regional food system, intentionally investing and supporting local retailers as part of the broader network is key.

Investing in locally owned grocery stores is a great way for communities to build a sense of connection and pride. Locally owned stores are often more in tune with the needs and tastes of the local community, and they can provide fresher, healthier, and more efficient shopping options. Additionally, locally owned grocery stores often support local farmers and vendors, which can help to create a more vibrant and sustainable local economy. Finally, when communities invest in locally owned stores, they not only create jobs like the large stores, but their money stays in the community.

The owners of Nashwauk Market stand outside the store with the store's sign in the background.

“My mother is 76 years old and lives in town and I don‘t feel like she should have to drive 25 miles to Hibbing or Grand Rapids just to get groceries. Plus, there is a senior apartment across the parking lot from us, and most of those residents don’t drive. Our store is crucial for them.” 

Tony Fragnito, co-owner of Nashwauk Market

What barriers do these small business owner face?

Local grocers and food producers often face a variety of barriers to success. A common factor is that they often lack the resources and infrastructure that larger chain stores have access to. This includes access to capital and modern technology, which can make it difficult to compete with larger chains that have more resources and a larger customer base. Additionally, locally owned food retailers may struggle to compete with the low prices offered by larger chains, as they often do not have the same buying power and economies of scale. Finally, locally owned food retailers may struggle with marketing and advertising, since they often do not have the same budgets and resources as larger chains.

Additionally, food producers may face challenges related to zoning or permitting regulations, the cost of product packaging, labeling, advertising, or distributing their products. These challenges can make it difficult for local businesses to compete with larger, more established companies.

As mentioned above, access to capital is a significant barrier that these local businesses often face. If these businesses are vital to local economies, why do banks and other lenders struggle to provide capital to them?

  1. Lack of collateral: Many small food producers and retailers lack the assets to present as collateral when applying for a business loan. This can make it difficult for banks to approve a loan and makes them wary of taking on the risk.
  2. High start-up costs: Banks typically require small food producers and retailers to have sufficient start-up capital to fund their venture before they approve a loan. This can be difficult for many small businesses to obtain.
  3. Unstable cash flow: Banks typically prefer to lend to businesses with stable cash flow. Small food producers and retailers can often struggle to provide financial statements that prove they have consistent revenue. This is especially true for the seasonality that impacts most of northern Minnesota and Wisconsin.
  4. Lack of credit history: Banks often require a credit history to determine the risk associated with a loan. Small food producers and retailers may not have a sufficient credit history to demonstrate that they are a reliable borrower.
  5. Low profitability: Small food producers and retailers often have relatively low profitability, which can make banks hesitant to lend to them.
  6. Limited experience or resources: Many small business owners are required to where a lot of hats to work on their business. To compete in the food system markets limited expertise or access to technical assistance can make success difficult in a competitive market.

How does the Entrepreneur Fund support local food systems in northern Minnesota and Wisconsin communities?

Figure 4: Entrepreneur Fund Secret Sauce: Pairing lending and advising services for a strategic path toward small business growth.

As a CDFI (Community Development Financial Institutions), the Entrepreneur Fund plays an important role in strengthening local food systems to support communities of all shapes and sizes in northern Minnesota and Wisconsin. We do this through our ability to provide lending and advising services to clients.

Figure 5: How the Entrepreneur Fund supports the core components of the local food system.

Providing access to capital for local food retailers and producers is an important way to strengthen local economies, support food security, and encourage sustainable agricultural practices. Access to capital allows local food retailers and producers to purchase necessary equipment, hire additional staff, and invest in technology that can help them grow their business. It also helps to create jobs, stimulate economic activity, and provide access to fresh, healthy, and locally sourced food in communities. A few ways we have supported the local food system include:

  • Offering working capital loans to food retailers and producers to help them cover their day-to-day operations and inventory.
  • Providing equipment and machinery loans to food retailers and producers who need to upgrade or expand their operations.
  • Offering debt consolidation loans to food retailers and producers who are struggling with multiple payments or high-interest debt.
  • Providing term loans to food retailers and producers who need to finance longer-term investments.
  • Providing flexible repayment options that fit the seasonality of their business.
  • Offering real estate loans to help food retailers and producers purchase, renovate, or refinance their properties.
  • Developing partnerships with local suppliers and distributors to help food retailers and producers access the products they need to succeed.
  • Establishing mentorship and training programs to help food retailers and producers develop their business skills.

Figure 6: Entrepreneur Fund lending to food retailers and producers 2016-2022.

To learn more about our work, please visit EFund Fueling Local Food Systems.

As we look forward to how small businesses and the Entrepreneur Fund can continue to foster a diverse regional economy and resilient communities, strengthening the fabric of our local food systems is an important piece of our work. To learn more about EFund and our work on healthy food access reach out to Janie Moore, Director of Impact & Strategic Initiatives.