Food Hub Grows from Passion Project to Essential Market Link for East Coast Farmers
Jul 8 2021
When Sandi Kronick started Eastern Carolina Organics (ECO) in 2004, she was an unlikely candidate to run a wholesale produce distribution company. Fresh out of college, she had never worked in a grocery store or on a farm. She had never driven a truck. She hadn’t even taken a business class. But she was passionate about connecting small farmers to local food markets and couldn’t bear to disappoint them: “I kept thinking, ‘I cannot fail these farmers.’ I knew that farmers’ doors had been knocked on a million times before by some young optimistic person like me, and I didn’t want to be another one of those people who has an idea, starts it, and then it fizzles.”
That drive kept her going in a tough industry. She learned to negotiate prices and market organic produce. She even learned to drive an 18-foot truck. And ECO—which has since been rebranded as Happy Dirt—grew into a successful distribution company that now works with more than 100 farmers up and down the East Coast. Along the way, the B Corp has weathered a few (literal) storms and found resilience—helped, in part, by a steady lending relationship with RSF.
“I’m really proud of that relationship,” Kronick says. “I’m proud of the extra grit that Meredith Storton, our relationship manager at RSF, and her predecessors put into understanding who we are as a company and as an industry. They provided some heavy lifts during our challenges and successes. We had a couple of really hard years after Hurricane Florence came through North Carolina and it was brave of them not to say, ‘We’re moving on.’”
Pilot project helps farmers switch from tobacco to organic veggies
Kronick arrived in North Carolina in 2001 to work at the nonprofit Carolina Farm Stewardship Association. Part of her job was to help farmers develop new markets. North Carolina had “a decent pocket of organic production” at the time, Kronick says. But organic farmers mostly sold their produce at farmers’ markets.
Kronick was passionate about eating locally and wanted to make it easier for North Carolina farmers to sell their fruits and vegetables to the stores where she shopped. So she launched a pilot project under the association’s umbrella, with the idea that it would eventually spin off as a separate organization.
The National Organic Program went into effect around that time, as did the federal tobacco buyout program, designed to encourage farmers to get out of the tobacco business. That created an opportunity for Kronick. She applied for assistance from the North Carolina Tobacco Trust Fund Commission and received a $48,000 grant to start an organization to connect small farms in the Carolinas—including those making the transition from tobacco to organic vegetables—with local markets.
Kronick had hoped ECO would be a farmer-owned co-op, but farmers balked at that. They were busy enough. When the venture incorporated in 2005, 13 farmers owned 40% of the company while Kronick and another staff member each owned 30% (Kronick now owns 60%).
Farmers concentrated on growing while Kronick and her staff—which now includes 22 people—handled the billing, sales, marketing and transportation of their produce. ECO also helped formerly isolated farmers develop professional networks, connecting them to each other for advice on growing or handling business matters like third-party certifications.
RSF tailors financing to the food hub’s seasonality
The company worked as a cash-funded operation for several years but eventually needed a lender to buy a warehouse and support growth. “It was nearly impossible for banks to determine the value of our company because we were specifically working with small farmers and new farmers, and it was hard for us to get lending,” Kronick says. “It was exhausting and there were times when I felt like, ‘My entire job is talking to banks now.’”
ECO ended up working with several lenders over the years, but Kronick had to spend significant amounts of time educating them about food hubs, which support local and regional food systems by providing services such as aggregation, storage, processing, distribution and marketing. It was a great relief when ECO connected with RSF in 2014, looking for a line of credit to help cover salaries, mortgage, rent and truck-related expenses during the lean winter months. RSF not only worked to understand the food hub model, but also deeply supported ECO’s mission, Kronick says. “It was really empowering to work with folks that we feel intimately connected to and that we really share values with.”
RSF extended ECO a $250,000 line of credit from its Food System Transformation Fund and structured it to accommodate ECO’s seasonality. “Instead of doing a traditional line of credit, which would have allowed ECO to borrow only a certain amount each month, we offered them a line of credit with a clean-down period, which basically gave them more access when they needed it,” Storton says.
In 2015, RSF upped the line to $350,000, and this year it moved Happy Dirt’s loan into the Social Enterprise Lending program. It was a graduation of sorts: Happy Dirt now meets the credit and loan size criteria for RSF’s flagship lending portfolio.
ECO weathers storms and emerges as Happy Dirt
ECO needed all the help it could get when farms in North Carolina got hit by Hurricane Matthew in 2016 and Hurricane Florence in 2018. The storms caused roughly $1.5 billion in crop and livestock losses. When Florence landed, 25% to 28% of ECO’s sales were in sweet potatoes, and the hurricane wiped out the entire year’s crop. The company struggled. “We were never in default,” Kronick says, “but we were asking for certain levels of patience.”
RSF stood by the company. “They had a couple of ups and downs and business challenges over the years,” Storton says. “But we also saw their ability to pivot their business model and get around these challenges.”
The most recent pivot came in 2019, when the company expanded beyond North Carolina to work with farmers up and down the East Coast and rebranded as Happy Dirt. That move helped them create resilience against weather challenges and regain their financial footing before COVID-19 hit.
Making farmers’ lives better
During its 17 years in business, Happy Dirt has paid more than $40 million to farmers and helped farms that started with three to five acres of organic production grow to 20, 50 and even 300 acres. The company is also starting to see years of efforts to cultivate partnerships with farmers of color bear fruit.
“One of our original farmer owners is Black and we’d like to ensure there’s a long legacy of Black farmers in the Happy Dirt family behind him,” says Kronick. “We have several new farms that we’re working with thanks to the rebrand and the ability to work with non-Carolina farmers and farms that are not certified organic.”
The rebranding and expansion also led to a successful, profitable 2020. Kronick says she’s not sure where they’d be if RSF hadn’t stuck by them through the harder years. “It’s wonderful to enjoy some really gorgeous years with RSF now because of how much they supported us authentically in challenging times,” Kronick says. “I love reporting back to all the folks that own the company with me and saying, ‘This is not your average lender.’”