Supply Chain Response to Institutional Markets’ Demand for Healthy and Sustainable Food Options

Institutional food buyers in the U.S. are increasingly demanding food products that are safe, traceable, healthier, local/regional, or sustainably produced and supplied. These markets consist of schools, universities, hospitals, charities, correction facilities, clubs and other similar organizations that buy goods and services to meet demands of their end-customers (students, patients, prisoners, etc.). These institutions comprise a large portion of the U.S. population. In 2008, the total number of children and adults enrolled in schools throughout the country - from nursery school to college - was estimated at 75.5 million (i.e., 18.7 million in colleges and 56.8 million in schools). This amounts to more than one-fourth of the U.S. population age three and older (U.S. Census Bureau, 2009). About 29 million children are participating each month in the National School Lunch Program (NSLP). The NSLP, established by the 1946 national School Lunch Act, has the goals of providing school children access to nutritious foods and creating markets for food producers. In the latter case, the school food program serves as an outlet for commodities that are assumed to be in surplus by the USDA. The NSLP functions through an entitlement program, in which participating schools receive cash reimbursements based on family income level of participating students (Allen and Hinrichs, 2007). The schools are entitled to use the cash reimbursements to order and purchase commodities through the USDA commodity program. Most of these commodities are meat, cheese, fruit and vegetable products that mainly come in processed form. One of the growing concerns about the USDA commodity program is about its perceived impacts on child nutrition and health. In the last few years these concerns have led to increased attempts to make changes in school food programs and nutritional makeups. Schools are increasingly demanding food products that are safe, sustainable and come from known local and regional suppliers or producers. One of the key challenges in this transformation process is finding the right product and appropriate supply chain that can assume a wide range of responsibilities to meet demand. The present paper explores the responsiveness of the conventional food supply chain (primarily food manufacturers, distributors and wholesalers) in the produce, dairy, bread and poultry sectors to meet school districts’ desired food purchasing and procurement changes. The study is part of a large research project that focuses on the Getachew Abate Kassa 321 transformation of food purchasing and procurement practices in large urban school districts (i.e., school districts with more than 40,000 students). Specific objectives are to (1) learn manufacturers’ and wholesalers’ (hereafter food suppliers) perceptions about specific demands by the school districts, (2) assess logistical requirements and product development activities and challenges while establishing a business case to meet demand as perceived by the food suppliers, and (3) identify other related supply chain issues to transform school food procurement and purchasing practices.