Study: Rural food deserts could benefit from direct-to-consumer strategies

The prevalence of food deserts in rural America is opening the door to another potential solution besides building more grocery stores—having food producers deliver directly to consumers, according to a report from cooperative bank CoBank.

Somewhere between 27 million and 34 million Americans, based on respective U.S. Census Bureau and Feeding America estimates, have experienced food insecurity, meaning that roughly one in 10 people wrestled with the possibility of not having enough food, said the CoBank Knowledge Exchange’s “How Delivery Innovation Can Reduce Hunger in the Heartland” study, released Thursday.  

In rural areas, the problem is especially acute. Rural communities account for 87% of counties with the highest food insecurity rates yet represent just 63% of all U.S. counties, Denver-based CoBank noted.

Rural consumers’ chief stumbling block is that they reside in areas with a prevalence of low-access food deserts, where supermarkets with a broad assortment of foods and beverages are too far away to access readily, CoBank explained in its report, noting that dozens of rural counties have no food store options.

Retailers, too, encounter obstacles to shrinking food deserts. Though Walmart stands as the largest U.S. grocer—with over 5,200 stores in all 50 states plus the District of Columbia—the retail giant still has “considerable gaps in its market penetration,” CoBank said. And where are those gaps? According to a Walmart U.S. locations map in the report, the retailer’s lowest levels of penetration are in the Midwest and Central West regions, which are more sparsely populated and rural than other parts of the country.

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CoBank's report cited research showing that food deserts tend to be in more rural, sparsely populated regions of the country. / Image courtesy of CoBank

Population density presents an economics hurdle for food retailers. Since many food deserts are in less-populated areas, retailers may lack the necessary customer base to generate the sales and profit levels to support a full-size grocery store in these markets, according to CoBank’s study. Convenience and dollar stores have increased their fresh food offerings and improved access in some rural communities, yet slim profit margins in these areas inhibit their growth. Dollar Tree and other retailers also have recently noted that higher sales of low-margin purchases like food impact profits, the report said.

Pointing to the “sheer volume of consumers experiencing food insecurity due to poor access,” CoBank identified a market opportunity for food manufacturers and agribusinesses: direct-to-consumer e-commerce platforms or direct delivery, which the co-op bank said could be a “relatively easy and profitable means” to improve the food options for rural Americans in food desert areas.

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“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,” report author Billy Roberts, senior food and beverage economist at CoBank, said in a statement.

Citing Brookings Institution research, the CoBank report said 93% of the U.S. population—including 90% of those living in food deserts—has access to food delivery from at least one of four major players: Amazon, Instacart, Uber Eats or Walmart. But that percentage plunges to 37% for rural residents within limited-access food deserts. The lack of reliable broadband online access also impedes grocery retail access.

“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,” explained Roberts.

Indeed, agribusinesses and food manufacturers looking to establish a more direct line to end-customers may want to take a page from tactics employed by producers amid 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,” Roberts said.

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While fresh foods present a distinct challenge, there are delivery mechanisms available to producers for shelf-stable food and beverages, even if that entails FedEx, UPS or the U.S. Postal Service, CoBank reported. For example, Whole Foods Market offers hundreds of its 365 own-brand products for U.S. shipping through Amazon. What’s more, the report said direct-to-consumer avenues will become more viable as delivery technology advances. Walmart and Google subsidiary Wing, for instance, have teamed up to pilot 30-minute drone delivery of household essentials and groceries to customers’ homes within a six-mile radius of two stores in the Dallas-Fort Worth area.

“These examples are indicative of where retailers—whether grocery stores or even convenience stores or dollar stores—could serve rural consumers and offset the issue of food insecurity stemming from limited access,” CoBank stated in its study. “In addition, food/beverage manufacturers themselves could incorporate such technologies for more of a direct-to-consumer relationship and establish their respective brands as part of the consumer’s ensconced ordering procedures.”