Whole Foods invests in its grower

Photo courtesy of Whole Foods Market.
Brian Nicholson,left, vice president of marketing and sales, and Joe Nicholson, president and CEO, both of Red Jacket Orchards, are growing apricots trained in the Spanish Bush system in a high tunnel bay that will be skinned next spring.

If you think no one wants to lend you the capital you need to expand your operation, you’re not alone; in some cases, you may even be right. But however, one well-known retailer is anxious to come to your aid.

Local producer loan program

Whole Foods Market, a 270-store supermarket chain based in Austin, Texas, is that innovator. Noted for its commitment to community, quality products and local purchasing, the company expanded its involvement in late 2006 with its local producer loan program.

Whole Foods offers up to $10 million in loans annually to independent local producers, including those in the produce, dairy, meat and value-added industries. The interest rates are favorable for producers, with minimal paperwork required. That may sound too good to be true, but that’s just the beginning of the benefits. Loan applicants are not required to be current vendors nor are they asked to supply Whole Foods during the life of the loan. Compliance with the supermarket’s quality standards is mandatory, however.

Nuts and bolts of the program

Through the loan program, Whole Foods seeks to strengthen its relationships with local producers and to work with them to expand the availability and variety of locally grown foods. It also sees the program as helping to support the communities in which it does business and to reinforce its commitment to environmental sustainability.

Applications are accepted at all times and are available online at www.wholefoodsmarket.com. Funds may be used for specific expansions and/or capital expenditures, but they can’t be applied to operating expenses or new ventures. Acceptable projects include new equipment or infrastructure, crop expansion and conversion to organic production. Applicants must have cash flow available for loan payments, along with a competent business plan. Although no prior relationship is required, program materials indicate that a solid partnership does earn applicants a bit of extra credit. Being located within a few hours of a Whole Foods store and using organic methods are additional pluses.

Loan amounts range from $1,000 to $100,000, not to exceed 80 percent of the total cost. Program Director Jenny Brown says that $50,000 is an average funding level. At this time, fixed interest rates between 5 and 9 percent are available. There are no closing costs or other fees, except for a small processing fee required of applicants who pass the initial screening review. Brown says that the repayment period varies depending upon the loan amount, and there is no prepayment penalty. She emphasizes that Whole Foods works closely with participating growers to ensure successful projects.

Advantages to growers

Brown says her company’s loan experience is quite different from the typical bank transaction. Whole Foods has an appreciation for the hard work, great products and unique challenges involved in local agriculture.

Mark Nicholson, who operates Red Jacket Orchards in Geneva, N.Y., with his father, Joe, and twin brother, Brian, couldn’t agree more. Red Jacket received one of the first loans in early 2007.

“It is interesting and exciting that a retailer is willing to risk its assets and invest in the grower community,” Nicholson says. “They are putting their money where their mouth is when it comes to local producers.”

Brown says that the company’s practice of spotlighting local products is another plus for farmers, giving them a marketing edge that wouldn’t be associated with a traditional financial institution.

“We started the local producer loan program because of our desire to buy local and this helps farm businesses grow,” Brown adds.

Farmers welcome the company’s flexibility and commitment to loan recipients’ success. Loans in good standing are eligible for additional funds after one year, and Whole Foods works with producers when things don’t go quite as planned. Nicholson says that when his family’s project turned out to be more costly than projected, program officials increased the amount of the loan.

Red Jacket’s expansion

Red Jacket Orchards is almost 100 years old and has been owned and operated by the Nicholson family since 1958. The Nicholsons grow 600 acres of apples, berries and specialty fruits. They’ve supplied Whole Foods Markets in New Jersey and New York for several years, operate a retail store and frequent New York City farmers’ markets.

Nicholson says Red Jacket applied for a Whole Foods loan in early 2007 and has been pleased with the program. The ease of applying and speedy approval got things off to a good start.

“An outside source was very welcome and allowed us to go ahead with a project we couldn’t have otherwise,” Nicholson says.

Red Jacket’s loan allows the orchard to diversify into specialty fruits such as apricots, Japanese plums and cherries. Without specialized growing techniques and spring frost protection, crops like those would be doomed in the Nicholsons’ area. They are battling Mother Nature with Haygrove tunnels.

Two acres of apricots, cherries and plums were planted under cover during 2007 and 2008, with the first crop expected next year. Nicholson says the tunnels take a lot of risk out of climate-sensitive, high-value crops and may allow the orchard to market fruit ahead of the traditional season.

Nicholson says the favorable terms and flexibility of the loan program made it attractive. He believes that his family’s prior relationship with Whole Foods did facilitate the approval process, but stresses that there are no strings attached to the funding.

“Everyone’s happy [with the arrangement] and excited about the potential of our new crops,” he adds.

Working with Whole Foods

It would seem that such a beneficial program would have more applicants than it could fund, but Brown says that isn’t the case.

“Our greatest challenge has been getting the word out,” she says. “Most people don’t think of a store for a loan.”

To date, 30 farms have been awarded loans for a total of $2 million. Although that’s impressive for an effort that is less than two years old, Whole Foods has pledged up to $10 million annually.

“We are very actively looking for produce growers to be a part as both vendors and loan recipients,” she adds.

Whole Foods considers products to be local if they are grown within seven hours’ travel time of one of its markets. Growers interested in supplying the chain can contact the produce department of the nearest store. If Whole Foods isn’t operating within the immediate vicinity, check the Web site for the closest regional office and contact the regional produce buyer.

Brown says each region makes independent purchasing decisions and is flexible about such details as delivery, a large obstacle to many growers. Some vendors deliver products to local stores or distribution centers. In some cases, Whole Foods may be able to pick up from farms.

Whether you are looking for a new market or a new source of funding, Whole Foods should be a part of your game plan.

The author is a freelance writer based in Greensboro, N.C.