Access: Aggregating Ontario Product
Historically, farmers in Ontario have delivered their produce directly to local grocery retailers, restaurants, and institutions. This practice has largely disappeared for two reasons. First, distributors emerged as a one-stop shop for restaurants and institutions to obtain product, eliminating the need for multiple suppliers. Second, as franchises and corporate foodservice companies became more dominant, fixed contracts with select distributors to supply categories of products have become the norm.
Over the years, large distribution companies have become more efficient and slowly pushed out smaller players from the market. This is particularly evident in rural areas where the volume of product isn’t as high, and the distance between delivery points can be quite large. The ability for large distributors to bring large orders of a combination of products has trumped the local supplier’s ability to supply a smaller volume and variety of products.
As it becomes increasingly difficult for farmers to access the marketplace directly, they looked to form partnerships with packers that could aggregate products from many small farms to service large retail and foodservice distribution channels. Packers generally specialize in specific commodities such as potatoes, apples and greenhouse vegetables and are able consolidate the volume of many farms to better supply large retail and the foodservice sector.
Smaller, regional distributors have begun appearing around the province to meet the increased demand for local food. These distributors aggregate product on behalf of a number of farmers from a specific region and have been particularly successful in servicing restaurants where there is a high demand for fresh local product.
Although there has been some success in aggregating product in parts of the province, there are still barriers for farmers in accessing foodservice.
More specifically, the barriers include:
- There are relatively fewer customers in rural areas over much larger distances, making distribution costlier. This is a particularly salient problem for Northern Ontario producers as communities do not purchase enough product to support local farmers.
- Corporate and institutional contracts make it difficult for smaller farmers to bid on contracts.The current model favours broad-line distributors and their suppliers. For the few existing regional aggregators, accessing BPS institutions is difficult as the majority rely almost exclusively on broad-line distributors for the supply of their food.
Progress being made:
- Two northern producers worked together to share inventory systems that will enable them to access each other’s products. Three regions are working together to identify distribution systems that are complementary of each other’s businesses.
- One producer has created a co-packing line to aggregate the product of a number of other producers in their vicinity, helping other producers gain access to new marketplaces. This producer already had the capacity to fill orders for BPS institutions and is used to dealing with broad-line distribution companies. This makes the producer a more valuable resource to the distributors as they are now able to access a greater number of products through a single sales contact.
- After noticing that many restaurants were interested in buying local products but didn’t have the time to make direct partnerships with the farmers growing the necessary products, a number of Toronto-based entrepreneurs have seen the need to help restaurants make direct connections with farmers. After gaining success serving restaurants, they have now begun to make connections in the public sector and are learning how to navigate a more regimented buying process.
Steps to aggregating more Ontario product:
- Pilot a new model of regional food distribution that connects large-scale distributors to regional aggregators in order to satisfy customer demands for local food.
- Identify the market potential for regional aggregators and food hubs across the province.
GOVERNMENTS AND OTHER FUNDERS
- Provide cost-shared grants for the development of different models of aggregation and food hubs.
Keep your eyes open for our next Local Food Solution Paper where we will be talking about People: Attitudes and Beliefs. Follow @ontariofresh on Twitter to join the conversation.
This series is written with contributions from: Ryan Hilborn, Kathy Macpherson, Franco Naccarato, Lisa Ohberg, and Julienne Spence.
If you want to know more about the value chain, consult Connecting the Links: The BPS Foodservice Supply Chain.