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Secret Sauce: How to get a food product from the farmers’ market to store shelves

Not all local food processors benefit from "Buy Alberta" programs

Apr 22, 2013

by Carissa Halton

At the “Buy Alberta” campaign launch at Edmonton’s Kinnikinnick Foods northside bakery in December, Premier Alison Redford wore a crisp white overcoat embroidered with the campaign’s brand: “Buy Alberta. Taste. Smile. Repeat.” Partnering with the Alberta Food Processors Association and Safeway’s 86 Alberta stores, more than 1,800 qualifying products have been branded with “Buy Alberta” shelf tags.

Premier Alison Redford at the Buy Alberta campaign launch
Photo courtesy The Edmonton Journal

But Safeway isn’t the only retailer hoping to capitalize on growing consumer demand for local products. Save-On-Food’s “Alberta Proud” campaign is splashed on billboards and bus stops. And in March 2013, Co-op stores in Medicine Hat, Red Deer and Calgary launched their “Localize Program,” marking local products with a shelf tag that includes a rating out of 10 on measures that include local ownership, local ingredients, local production and sustainability. With all this attention fixed on local products in major retail stores, it would appear Alberta food processors stand to benefit.

Not necessarily.

“There are definitely limitations in the local market: there are only so many suitable delis and independent shops.” – Carol Olivieri, founder, Blue Kettle Specialty Foods

While there may be an increase in consumer demand for local products, it still remains to be seen whether Alberta food processors can scale up to fully capitalize on it.

There are some notable success stories of Alberta food processers scaling up from the extremely local farmers’ market setting to retail shelves. CattleBoyZ BBQ Sauce, with its signature beer-style, latch-topped bottle, had its first retail sales in a small butcher shop in Calgary’s Eau Claire Market.

Now it’s sold in stores across Canada. Initially made and bottled in Joe Ternes’s kitchen, it was his family’s time-tested recipe. In 1994, Karen Hope was the Eau Claire Market manager, and she loved his sauce. Hope, a marketing specialist, and Ternes went on to form CattleBoyZ. Together they established the brand and found a manufacturer, and after a year of perseverance (and a bit of luck), the sauce was selling as a seasonal product in western Costco locations.

But the move from the farmers’ market to larger retailers’ shelves rarely happens so quickly. Another successful Alberta food processor, Kinnikinnick Foods, grew more organically, thanks mostly to the powers of the Internet. In the 1990s Kinnikinnick’s gluten-free baking products could be bought at Edmonton’s Old Strathcona Market, and at the time it was one of the few such products available. Jerry Bigam, the company’s current CEO, was a big fan and regular customer, and he decided to buy the company with the hope of expanding its operations. But after struggling to get shelf space at major retailers, he turned to online sales in order to grow the business. “We were the first company to supply perishable food on the Internet,” Bigam says. “For $10, we could deliver product anywhere in North America overnight.”

The online business helped them grow their sales by 60 to 70 per cent annually, and eventually major food distributors started calling them. They now supply product to 65 warehouses and 10,000 stores across North America. But for many local, small-scale processors interested in scaling up, there are significant and often systemic challenges. Ted Johnston, the president and CEO of the Alberta Food Processors Association, has some sobering advice for anyone looking to make the leap. “First,” he says, “they need to buy a giant bottle of Pepto-Bismol.”

The conventional retail system is the first challenge that small-scale processors looking to grow their business must face. Because it is geared towards specialization and scale, smaller producers have a difficult time breaking in. “The retail business is characterized by large chains,” Bigam says. “When you make a deal with them, you typically need to supply the entire chain.” That means all 230 Safeway stores or the more than 1,000 Loblaw stores nationwide, and that can be too much, too soon for a smaller producer that’s more comfortable with the scale of the farmers’ market.

Sometimes companies can do regional deals with the large chains, but there is little in the way of mid-level retailers in Alberta. “For instance, on Vancouver Island, Thrifty’s is a nice scale-up for a small producer,” Bigam says. “But we don’t have a lot of those options in Alberta. We have the farmers’ market, then the big retailers. It is a hard environment for small producers to grow.”

The management structure these massive retailers use is also a challenge. Meghan Dear owns Localize Your Food, a company that was hired by the Co-op stores to co-ordinate their Localize Program. “There is a direct relationship with how much control an individual store has over its management and the number of local or regional products they have on their shelves,” she says. “The more control store owners or managers have of their merchandise, the more local food they have.” Bigam agrees. “Companies like IGA and Sobeys give a little more autonomy to managers and will often find products made by local producers and bring them in to try. If you are lucky, you might grow.”

Access to financial capital is another barrier. “Traditional agriculture lenders don’t know what to do with smaller businesses,” says Tom Johnston, a professor in the University of Lethbridge’s geography department. “They don’t fit in their business models.” Kinnikinnick managed to circumvent this challenge in the early stages of growth by virtue of their Internet business. “The nice thing about the Internet was that it provided us with cash immediately on point of sale. Eighty-five to 90 per cent of our business was Internet business and that was all cash; it helped us afford to expand. Trying to grow the conventional way, waiting 30 to 40 days for someone to pay you out, is tough to do,” says Bigam.

Edmonton local-food impresario Jessie Radies (the former owner of the Blue Pear and the founder of Live Local Alberta) agrees that the paucity of intermediate stages available to Alberta producers between the farmers’ market and the supermarket stunts the growth of many. “We are not seeing processors scale up. We are seeing some, but not enough,” she says. “There are points in the growth of your business where instead of taking organic, small, incremental steps, you then have to take a big leap. That leap costs a lot of money and requires specialized expertise and skill. We need more diversity for small to grow into medium then to grow into large.”

The provincial government has taken some steps to help. Agri-food entrepreneurs have access to facilities such as the Food Processing Development Centre and the Agrivalue Processing Business Incubator, which help companies looking to scale up by renting out test kitchens and a pilot plant. Alberta Agriculture and Rural Development amalgamated a number of branches that offer educational opportunities for processors wanting to scale up into the Local Domestic Market Expansion Branch. Its “new venture coaches” help business owners understand their options when it comes to bringing their product to market. The branch is working to foster collaboration within the industry, and is conducting research that may inform new policies, legislation and regulations for the local market industry. Finally, local initiatives like Live Local Alberta and Dine Alberta are focusing consumers’ attention on the opportunities to “Shop Local First.”

But sometimes, for some producers, the risks of scaling up just aren’t worth taking when the rewards are uncertain. Take Blue Kettle Specialty Foods, the business that St. Albert sisters Marcy Mydlak and Carol Olivieri founded 15 years ago. It all started with a case of fresh tomatoes that Mydlak was given. She processed it into a huge batch of salsa that she gave away to family and friends, and over the next three years she fielded constant requests for the sauce, always making more and giving it away. When it came time for a career change, she asked her sister if they could work together to bring the salsa to market.

Alberta products from Kinnikinnick, CattleBoyZ and Blue Kettle Specialty Goods

Blue Kettle Specialty Foods sold its first three products at the St. Albert Farmers’ Market: the salsa, a tomato pasta sauce and a chili paste. Over the next eight years, they would expand their product line, adding one new product every year, and soon a number of small, independent stores (like the Grapevine Deli in St. Albert and the Italian Centre in Edmonton) were carrying their products. By that point they had moved from their home kitchen to a leased production facility, with both working part-time on the business. Then, five years ago, they built their own facility and automated some of the processing in order to expand their production capacity. While they are scaling up slowly, finding places to sell their products continues to be a challenge.

“There are definitely limitations in the local market: there are only so many suitable delis and independent shops,” Olivieri says. And while the majority of grocery products are purchased in large, retail chains, “getting a listing in these chains is just prohibitive for a small producer like me. To pay $4,000 to list each of our 15 products? It’s not affordable.” Those limitations have meant that the two sisters have had to grow their business more slowly than they might have liked. “We just weren’t willing to take that risk and mortgage our families so we could get on large retailers’ shelves,” Olivieri says.

“There are points in the growth of your business where instead of taking organic, small, incremental steps, you then have to take a big leap.” – Jessie Radies, former owner, Blue Pear restaurant

Recently, however, Blue Kettle’s product line has found shelf space at Save-On-Foods as the chain expands its local section (and waives the listing fee for local producers). Blue Kettle has seen its retail sales grow by 40 percent, with no resulting reduction in sales at the independent stores and farmers’ markets it was already supplying.

Still, Blue Kettle’s success story is the exception rather than the rule. While Save-On-Foods has taken some important steps towards making local products more accessible (and, by extension, helping those who make it reach a vastly wider clientele), those who want to make the leap from the farmers’ market to Save-On’s shelves still face a daunting challenge. And so, at a time when consumer demand for local products is growing, the people who make them still have only a few ways to get their products into the hands of consumers. That’s a challenge that local producers have to decide how, and if, they can find a way around.

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