DENVER — Food insecurity remains prevalent in the U.S. with sparsely-populated rural areas often being disproportionally affected. Rural communities comprise 63% of all U.S. counties but 87% of counties with the highest food insecurity rates. The primary challenge for rural residents is the prevalence of low-access food deserts, where the distance to supermarkets impedes the ability of consumers to access a wide range of food and beverage options.
According to a new report from CoBank’s Knowledge Exchange, the sheer volume of consumers experiencing food insecurity due to poor access represents a potential market opportunity for food manufacturers. Serving these customers through direct-to-consumer ecommerce platforms or direct delivery could be a relatively easy and profitable means to improve their food options.
“A sizable portion of the country falls within the realm of a food desert and with 10% of the U.S. population experiencing some degree of food insecurity, the market is there,” said Billy Roberts, senior food and beverage economist for CoBank. “Innovation in the areas of driverless and drone delivery could ultimately provide food and beverage companies even more opportunities to establish direct relationships with underserved rural consumers.”
U.S. Census Bureau data indicates that 27 million Americans suffered from food insecurity as of July 2023. Feeding America estimates the number of food insecure is closer to 34 million.
Dozens of rural counties have no food store options. Walmart is the largest food retailer in the U.S. but there are considerable gaps in its market penetration. Population density suggests many of the food deserts in less-populated areas of the country simply do not have the consumer base to support a full-size grocery store.
Research from The Brookings Institution finds 93% of the U.S. population—including 90% of people living in food deserts—has access to food delivery from at least one of four major players: Amazon, Instacart, Uber Eats or Walmart. However, only 37% of rural residents within limited-access food deserts have access to the major food delivery services. Significant barriers remain for these communities, often including the lack of reliable broadband connectivity.
Convenience and dollar stores have increasingly focused on foods, improving access in some rural communities. However, low margins may be an obstacle to their continued growth in food sales. Dollar Tree recently pared down its profit expectations, citing an increase in low-margin purchases such as food, as well as issues with shrink and fuel costs.
Roberts said agribusinesses and food manufacturers looking to establish a more direct line to their consumers may well consider adopting tactics seen during the height of the pandemic. “Farmers in rural America expanded their own delivery capabilities to meet consumer demand that stemmed from empty grocery store shelves or consumers efforts to isolate themselves,” he said.
For shelf-stable food and beverage, delivery mechanisms exist even if it takes the form of FedEx, UPS or USPS. Fresh food offerings present another challenge altogether. But direct-to-consumer approaches will become more viable as delivery technologies improve. Food and beverage manufacturers could incorporate those technologies and establish their brands as part of rural consumers’ ensconced ordering procedures.
Read the report, How Delivery Innovation Can Reduce Hunger in the Heartland.
About CoBank
CoBank is a cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 76,000 farmers, ranchers and other rural borrowers in 23 states around the country.
CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.
