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Locavorism Inc.

Can a new business increase the amount of local food we eat?



One early Thursday morning in April, Dave Rand and Andrew Lutsey sat in their rented second-floor office in the old Testa Produce warehouse on the northern fringe of Pilsen waiting for a side and a half of beef and a whole hog from a farm in central Indiana. The delivery was late due to ceaseless overnight rains that rendered rush hour on the expressways a continuous logjam from the top of the city to the bottom.

The meat was headed to a handful of restaurants in town, via the Butcher & Larder, where it was to be broken down and parceled out before delivery. Rand and Lutsey also had a few pallets of produce from Wisconsin farms waiting downstairs in the warehouse, some of which had been delivered the day before by a farmer who had driven it all down from Viroqua in an uninsulated cargo van cooled by a running fan and condenser unit rigged up in the back. The haul—storage crops grown last year—consisted of overwintered potatoes, carrots, beets, rutabagas, heirloom beans, and bags of organic sweet potatoes that had been peeled and cut into sticks for frying. Rand and Lutsey had also received some of this season's first produce: a few boxes of spring green mix grown in an Indiana hoop house. But nothing was going anywhere until the meat arrived.

While they waited, Rand showed off iPhone photos of a three-and-half-pound, three-plus-inch porterhouse steak that he had grilled for his friends. It was from the same farm as the beef he was waiting for. He'd later show the shots to the chefs he'd visit as a kind of low-key sales pitch.

This would be the second meat delivery for Rand and Lutsey's new business, Local Foods Grocer—but its very first produce run. As the name implies, Local Foods Grocer is focused on the distribution of farm-direct meat and produce grown within a rough 350-mile radius of Chicago, utilizing a group of aggregation points close to the farms. It's a business model known in the current parlance as a food hub.

You might look at the number of restaurants around town that tout their use of locally grown foods and assume that this would be an uncomplicated task. But the development of the supply chain for local food hasn't kept pace with the demand. Lots of chefs in town may want to put a grass-fed rib eye on their menus, but there really aren't enough to go around, and even when there are, there's not a well-developed system in place that can transport the food raised by small producers with consistency and efficiency. That's because most food distribution networks exist to accommodate the big guys—the Syscos, or even big regional companies like Testa, which moved into a state-of-the-art facility a few years ago and began renting out its old space to smaller companies like Local Foods. The big wholesalers operate on a scale too large to be bothered by just a single delivery of a side and a half of pastured beef.

Rand and Lutsey hope to regularly bring in a lot more beef and pork than that, as well as goat, lamb, and poultry.

But they're just getting started. And as of April, they were getting started at a crucial time—the very beginning of the local growing season, still weeks too soon for seasonal bellwethers like asparagus and ramps.

"Since this is our first week of layering in produce to our operation, most of the volumes are kinda low," said Rand. So he didn't seem too upset when he placed a call to the trucking company he was paying $100 to pick up the meat. The truck, which had several other stops to make in the city, was still crawling north through Indiana and wouldn't arrive until 11:30 AM, some three and a half hours late. Rand only had a half-dozen deliveries to make that day, so while the partners waited, Lutsey printed out invoices: $57 worth of spring mix, sweet potatoes, pastured goat's milk, and feta for Prairie Grass Cafe; $169 in maple syrup, beets, carrots, milk, and cheese for Old Town Social; $45 in greens and dried blueberries for Perennial Virant; and $15 in greens for Table, Donkey and Stick.

There wouldn't be enough time for the Butcher & Larder's Rob Levitt to break down the beef and get it all out that day, so Rand would drop it off there first, take care of the produce deliveries, and come back for it tomorrow. Later in the day he was set to meet an Amish farmer, Merle Kauffman, who makes the nonhomogenized, low-heat-pasteurized, pastured goat's milk and feta Rand is selling. Kauffman had arranged for someone to drive him to town from downstate Arthur, and Rand had booked a room for him at the Ohio House Motel and made dinner reservations at Osteria Via Stato. They planned to visit a host of chefs the next day with samples. "He has no resources," says Rand. "He can't call. He can't look up a phone number."

"What we do best is build relationships with these smaller- and midsized farmers," Lutsey adds. "Testa probably wouldn't talk to him."

[photograph: local produce at Local Foods Grocer]
  • Jeff Marini
  • A selection of products that Chicago-based food hub Local Foods Grocer offers to chefs.

One of the main purposes of a regional food hub is to take distribution and marketing off the hands of farmers, so that they have more time to farm, and theoretically grow more food. Ideally, without the overhead expenses of marketing and the hours spent driving into the city to deliver to a bunch of kitchens' back doors, farmers engaged with foods hubs would spend that time growing more food—and making more money.

The food hub also has the means to connect with more farmers who don't have the ability to get their own produce into the city, increasing the availability of locally grown food for everyone: the public, grocery stores, restaurants, and institutional buyers such as schools or hospitals. Farmers who, like Kauffman, are in remote rural regions would take their produce to designated aggregation points, where it could be washed, packed, and even processed, as with the sweet potato sticks that came from Wisconsin. From there the food hub could contract pickups through less-than-truckload, or LTL, carriers—or trucking companies returning to the city with empty semi trailers.

Theoretically all of this would lower prices for the consumer, while meeting the increasing demand for locally grown food. On the other side of the equation, chefs would be able to place orders for multiple products with the food hub, and would no longer have to deal with large numbers of different farmers showing up at the back door all the time.

When he was the executive chef of the large pan-Latin restaurant Carnivale, Mark Mendez visited the Green City Market twice a week. "He used to buy more than anyone when I was working there," says Rand, who at the time was the market's farm forager, responsible for recruiting farmers to sell at the market and acting as their liaison with chefs. "He would waddle around that market and carry everything—like everything. He had like a little red wagon. And he'd fill this thing with just bins and bins."

Since opening Vera, his much smaller Spanish restaurant, Mendez no longer shops at the market. "Because I had 50 people working for me [at Carnivale], I could kinda step away and do that kind of stuff, and work with the farmers. But here [at Vera] we're janitors, reservationists, plumbers, and sometimes it can be kind of overwhelming." Mendez still buys from plenty of individual farmers. In high summer it could be as many as a dozen transactions a day. For each of them he has to text or call in individual orders. "There are people I'm always gonna use just because I have relationships," he says. "I'm gonna always buy lambs from this guy and I'm always gonna buy beef from this guy. But on the other hand, you have a beef guy, you have a lamb guy, you have a chicken guy, you have a greens guy, an arugula dude, a turnip guy, and a tomato dude. It just gets to be crazy after a while."

There have been a few attempts to start restaurant-oriented food hubs in Chicago in the past, but they've faltered. Mendez is always trying to get his hands on dairy products from Kilgus Farm, in downstate Fairbury, where they raise cows, pigs, and goats. One distributor kept promising a regular supply but would never come through, and eventually stopped calling. "Usually what happens is a lot of these companies are very small, and they deal with farmers, and farmers are kinda difficult to deal with. So sometimes, even from them, getting product week in and week out can be difficult."

But what sets Rand and Lutsey apart is the scale of their projected business and the investment they've already attracted. "It's a $3 million project, and we're almost two-thirds of the way there right now," Lutsey told me in early March, as we stood in the 15,650-square-foot former Hanna Cylinders factory on Elston just north of North. Rand and Lutsey have a hold on the lease, and once they hit $2 million they were going to sign on the dotted line and begin building out the space. There's a loading dock capable of handing semis, plenty of space for washing and packing stations, a processing kitchen, and 5,000 square feet of refrigerated space.

The partners aren't planning to limit their customers to restaurants. Further down the line they hope to open a cafe and a retail operation where the public can buy the same local meat and produce that Local Foods Grocer is selling to the restaurants. That would be a first for Chicago—a year-round, permanent, indoor farmers' market.

Rand and Lutsey don't just have dollars behind them. They have job histories that seem to lead inexorably to this end.

Rand, who's 28 and was born in Saint Louis, got his first real job in Alaska the summer after his junior year of high school, working at a salmon cannery in Bristol Bay, home of the largest salmon run in the world. He operated cranes and boom trucks, unloaded boats, and moved nets around. "I'd keep our old-ass fleet of vehicles running," he says. "The job was really called 'fisherman services.' It's like everything you can do to support the fishermen and keep them out on the water fishing." He continued to work there in summers through college, and over five years worked his way up to fleet manager, overseeing the logistics of getting a hundred vessels out on the water and back during the eight-week run when the cannery took in a half-million pounds of fish each day.

"I talked to farmers who had never come to Chicago or been to a farmers' market before. And I got to say, 'Don't be scared of the city. Come out. People want your products. You can make some money."—Local Foods Grocer cofounder Lutsey

After graduating from college he moved to rural central Washington state, where his wife got a job as a schoolteacher. There he found work at a small organic heirloom-grain farm, milling rye, wheat, and flaxseed into flour and hauling the sacks to restaurants and retailers in Seattle and Portland. It was the only farm in the country at the time that grew farro for retail sale, so he spent a lot of time making a case for it. "That job forced me to interact and do a lot of consumer education, because it was really kind of an obscure product." He took a break to earn a degree in sustainable architecture, which turned out to be an impractical decision in 2009's economy. He returned to farming briefly, and then, because his wife's family lives on the North Shore, began looking for work in Chicago. At the time the Green City Market, in partnership with the city's farmers' market program, was looking to fill its farm forager position. After interviewing with board members, including Rick Bayless, Rand won the job over some 500 applicants, and packed up and moved. "It got me totally into this community. I was immediately connected with the farmers. I got to help farmers learn about marketing. I talked to farmers who had never come to Chicago or been to a farmers' market before. And I got to say, 'Don't be scared of the city. Come out. People want your products. Go to a farmers' market, they're really nice. You can make some money.'"

Rand left Green City in early 2011, feeling he couldn't move up in the organization. He took a job at Quarter Circle Seven Ranch in Marengo, helping owner Frank Morgan raise grass-fed cattle and market it to restaurants. "I got the entrepreneurial bug and I was pumped to start ranching, learn how to do the horseback thing, just get out into the country, and then also use my connections here to leverage sales." When he started, he says, the ranch was processing 40 head of cattle a year, and when he left last October it was up to 650. He says he was personally delivering ten to 12 cows to the city every week.

Morgan died suddenly of a heart attack in January of last year, but Rand says the ranch made nearly $1 million in the ten months afterward. Yet he decided to leave in October. "It's a family I love dearly, and I really loved Frank, though," he says. "That was who I wanted to work for. When he passed, it wasn't the same. It lacked the fun and the energy for me—and that guy worked circles around me."

Rand began working his contacts, thinking he'd like to get into the distribution side of the local food movement. His work with Quarter Circle Seven and the grain farm gave him a firsthand education in the burdens small- and midsize farmers face in bringing their products to market. "Three or four people who I respect said, 'Hey, you should talk to Andrew Lutsey.'"

Lutsey, 30, grew up in Green Bay, where his grandfather and father built Gold Bond Ice Cream, a novelty manufacturer that at one time owned Popsicle. He worked in real estate and private equity in Chicago for five years before he got restless. Meanwhile his father started a hobby ranch in Door County, raising grass-fed beef and selling it at farmers' markets. "I was losing a little interest in the direction I was going, and so I decided to jump on board with him. He and my brother had been growing the business and I got into sales and marketing, a finance role. And I was spending a ton of time out there doing farmers' markets and wholesale deliveries as we were growing from about 40 head to where we are now, which is about 300 head. And we've since layered in a hog operation and a poultry operation."

But Lutsey and his wife didn't want to leave Chicago, and he began to look for ways he could apply his finance background to the food movement here. "I originally thought that there were these Web-based platforms that connect farmers with buyers. The more you start calling on some farmers, you quickly realize that distribution is the missing component—not necessarily the connection to the buyers, because for the most part the buyers know which farmers they wanna work with. So I completely turned my focus over to the distribution side of the business."

By the time Lutsey met Rand, he had most of a business plan finished and had been working with a longtime family friend, a venture capitalist who began introducing the partners to investors and helping them out with legal counsel. Meanwhile, Rand began selling the idea to his farmer and restaurateur contacts.

One of the first farmers they lined up was Rufus Haucke of Keewaydin Farms in Viola, Wisconsin, who also happens to run Just Local Foods, a sizable food hub of some 114 farms, about half of them Amish. Haucke collects produce from the farms, most within a 30-mile radius of his 15,000-square-foot distribution center, where it's cleaned, packed, and then shipped out to grocery stores in Minneapolis, Madison, and Milwaukee. Some of his farmers' produce has made it into Chicago through Testa Produce, the home-delivery service Irv & Shelley's, and the retail supplier Goodness Greenness, the latter two of which are food hubs themselves.

Haucke says the scale of his business—the number of farms he aggregates and their overall yield—has steadily increased since he got started in 2007. "On a farm level, you're asking yourself whether you should invest in a delivery vehicle and pay a driver to do this stuff. In some cases, the scale itself doesn't make sense. That's really why I got started. I'm looking at my own farm production saying, 'I've got a couple acres. I can't really afford to drive my stuff up to Minneapolis.'"

About a quarter of Haucke's own yield goes to a CSA program, but the rest goes in the aggregate for distribution.

As the demand for local food increases, it's becoming increasingly apparent that the traditional markets for farm–direct food—CSAs and farmers' markets—aren't going to meet the demand. Bob Borchardt owns Harvest Moon Farms in Viroqua with his wife, Jennifer. Borchardt, who has a background in marketing and spends about half his time in Chicago, has tried all sorts of ways to get his crops to market, including CSAs and seed–to-purchase wholesale programs. Increasingly, he thinks the only way farms are going to get more products to market is to join forces with big business.

"I think farmers' markets are not a way to change the food system," he says. "I mean, you have to charge $6 a pound for tomatoes to make it worthwhile to schlep down there." The key, he says, is to join forces with big wholesale distribution companies like Sysco—who are starting to answer the demand for local foods.

In the past Borchardt's sold wholesale produce to Sysco, not uncommonly considered to be an enemy of the local/sustainable, real food movement—and he's taken heat for it. "Someone told us we sold out because we sell to Sysco," he says. "All they do is sell ketchup and napkins and sugar packets and frozen beets. Well, they do that. They built a massive, massive business. But if I can go to Des Plaines and have one of their 300 to 400 trucks make our product go away, and then we get wired the money in three days, why wouldn't I do that?" This year Harvest Moon is outsourcing its CSA program to Peapod, and Borchardt's also talking to Rand and Lutsey about distributing his produce.

Rand and Lutsey don't see the big guys as competition. They're planning to use larger companies to backhaul produce from the aggregation points they're setting up (they've hired a logistics expert to sort that out). "You can't always look at your competitors as competitors," says Lutsey. "Sometimes you're gonna be partners, because the long-term viability of this business is built on everyone becoming more efficient. And there's only one way to do that, and it is not for us all to be buying our own trucks and hiring our own laborers."

That's part of the reason why Lutsey and Rand rent space from Testa Produce (which is developing its own local food program). "They're friendly," Rand says. "We might utilize this big Testa truck that just pulled up. Maybe that Testa truck is going to Madison today, and maybe we have stuff in Madison that needs to come back at the end of the day, and we can backhaul and help them out by filling their truck up."

Rand and Lutsey are now in the early stages of building their supplier and customer bases. In late April they were sending their weekly availability list—what they had on hand to sell—to about 20 restaurants, and the spring's first produce had yet to appear. The day after I went out with Rand on some of his first deliveries, he dropped off a bone-in cow forequarter at Old Town Social, where chef de cuisine Zeeshan Shah broke most of it down for burgers and braised the shank for a soup special. Shah said he would continue to purchase the beef for specials, sausages, and burgers. "We sell nearly 300 [burgers] a week, so we need to constantly source grass-fed, dry-aged beef." The next day Rand took the Amish farmer, Kauffman, around to give samples of his goat's milk to chefs. It was going to partly solve Mark Mendez's dairy problem. He was planning to buy some for Vera's house-made ricotta.

A small but steady supply of pastured goat's milk is a drop in a very big bucket when it comes to meeting the current demand for local food in Chicago. The partners still have a long way to go to fill it, but they've started to pour. "We're gonna go into the red before we get into the black," Lutsey says. "And when we get in the black is when it becomes really exciting."

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