The Farm-to-Table Opportunity

Jason Pleym, Two Rivers Specialty Meats | BCBusiness
Former meat salesman Jason Pleym took up butchery to start his own company.

Consumers crave fresh, local food, and local farmers are eager to fill the demand, but a distribution bottleneck is strangling the supply chain—farmers’ markets can only go so far. But a new business model is slowly emerging to bridge the gap

His days were long, 18 to 20 hours on average, and he spent most of them covered in blood. It was January 2008, and for Jason Pleym, a former meat salesman, each step toward building Two Rivers Specialty Meats Ltd. was an uphill battle. It didn’t help that Pleym had no professional experience as a butcher, and four whole beef carcasses had just been delivered to his small North Vancouver warehouse space.

“I was like a deer in the headlights when that first order showed up,” says Pleym, who had installed a walk-in refrigerator and a cutting area but little else. Well aware that he was working with a perishable product, he started calling grocery stores in Vancouver, Squamish and Whistler to ask if they could buy portions of the carcasses. “If I had to cut all of it, it would have taken way more than two weeks,” he says. “So I was just chucking it in the van and delivering it.”

In the meantime his wife, Margot Millerd Pleym, was working a part-time job to make ends meet, and his father-in-law’s ranch, Pemberton Meadows Natural Beef Co. Ltd., was set to deliver four additional carcasses every two weeks. Like many small business owners in their early days, Pleym knew he was in for a rough ride.

In B.C.’s fiercely competitive food industry, Pleym is one of many entrepreneurs trying to translate skyrocketing demand for local foods, particularly those that can be traced directly to their origin farmer, into a profitable business. This same demand is fuelling a boom in farmers’ markets and a spike in restaurants catering to a pasture-to-plate philosophy. While the logic may seem simple—rising demand should drive more businesses and sales—the business of local food distribution is extraordinarily complicated, with numerous roadblocks between local farmer and store or restaurant. First of all, historically predominant food distribution networks are sprawling, top-down businesses with myriad middlemen and very tight margins: most mid-sized distributors more capable of catering to small, local businesses were bought out long ago. Secondly, B.C. farmers are increasingly expected to become marketers of their own product, a transition for which many don’t have time or the inclination. And finally, the nuts-and-bolts logistics of physically transporting food from a farmer to a consumer are tricky when the goal is to preserve the narrative of local produce, which is necessary when consumers are asked to pay more.

Andrea Carlson is the chef and co-owner of Harvest Community Foods, a Vancouver grocery store and eatery, and was formerly the chef de cuisine at Bishop’s—a restaurant at the forefront of the farm-to-table ethos—where she witnessed firsthand the soaring interest in local food and farmers’ markets. “The growth from five years ago until now is just incredible. I don’t know how the farmers do it, because they have to be in so many places at once, it seems,” says Carlson. “But every week, in every community, you’re going to find some kind of farmers’ market happening in the summer. That’s because of the demand.”

Direct farmer-to-consumer sales have risen 147 per cent in recent years, from $46 million in 2006 to $113 million in 2012, according to a recent study by David Connell, a professor at the University of Northern British Columbia’s environmental planning department in conjunction with the B.C. Association of Farmers’ Markets. As not all consumers, restaurants and institutions are physically able or willing to change their shopping habits in order to buy food from farmers’ markets—as much as they may want fresh, local produce—this is concrete evidence, says Connell, of new business opportunities in local food distribution. For him, the question is whether the system will adapt fast enough to accommodate the opportunities.

Despite all the excitement about local foods, Carlson says that from a chef’s perspective, she has seen the supply system hit a stumbling block when it comes to distribution. “There have been all kinds of people who have tried to start up new distribution companies and not all of them work out,” she says, citing the infrastructure, from delivery vans to storage space to administrative systems, needed to distribute food to restaurants. “There’s just so much input you need for that.” As a result, the province’s food-distribution system needs an influx of mid-sized businesses like Two Rivers, says Connell, or it’s unlikely local foods will ever be anything other than a niche market.

Image: Paul Joseph
Two Rivers Specialty Meats deals directly
with local farmers and delivers to local

All told, B.C.’s food system feeds nearly 4.5 million people every day, and while 48 per cent of that food is produced in-province, the remainder has to be imported, according to The Economy of Local Food in Vancouver, a 2009 UBC study. That remaining 52 per cent is produced by domestic and international industrial farms and processors, bought by wholesale distributors or supermarket chains, then delivered to restaurants, grocery stores and institutions in bulk. It is a sprawling and complex system that has been increasingly under fire from environmental advocates, food security activists, farmers and consumers. “Over the last 50, 60 years, our food systems have scaled up,” says Connell. “The dominant food system is amazing at doing international global trade, but isn’t even geared toward provincial markets, let alone local markets.”

The prospect of connecting with a big distributor is uncomfortable for many local farmers. Kevin Klippenstein farms Klipper’s Organic Acres with his wife, Annamarie. They grow a wide variety of tree and ground crops on 40 acres near Oliver in B.C.’s Similkameen Valley. He says there are myriad horror stories of farmers being scalped by cutthroat businesses. “We were approached by a distributor and they said, ‘We want to buy your tomatoes and we’ll give you this price for them.’ Then they said, ‘We can get it from another farmer but at this price.’ So we match that price. Then it drops again and again, and it’s a race to the bottom,” says Klippenstein, with frustration in his voice. “Then the other grower comes to me and asks why I’m undercutting them. It pits one farmer against another farmer.” This, he says, is the common experience when farmers try to deal with traditional distributors. Because of their high costs of land and labour, the couple decided instead to distribute through farmers’ markets, where they can get a higher value for their tomatoes, apples and other seasonal produce. “If we were to go through a regular distributor, and the product has to pass through five different hands before it hits the grocery store, then our price just went from $2 a pound to 25 cents a pound,” he says. “That’s when distribution just doesn’t work, where the farmer hurts at the end and can’t make a living and has an off-the-farm job and has to struggle just to stay alive.”

The UBC study points out that most grocery stores, and institutions such as hospitals and schools, get their produce from long-established relationships based on low costs, large volumes and consistent appearance and size of food. That means small producers must build their own relationships with distributors and wholesalers to access this larger market. This can be a problem for small farmers who, as Klippenstein points out, make their living growing food and raising crops and don’t necessarily have the social graces or desire to deal with members of the public or a distributor. “We know a lot of farmers who don’t want to deal with the public. They just want to grow food and stay on their farm,” he says.

The unglamorous particulars of the logistics of food distribution aren’t frequently discussed: from the importance of standardized packaging and labelling, to the necessity of cold storage to prolong produce shelf life, to the transportation logistics required to deliver the food where and when it is ordered. Annamarie Klippenstein says issues surrounding packaging are a big untold side of the story. “Most farmers—I would say 90 per cent of farmers out there—don’t have the right packaging,” she says. As soon as a farmer starts working with a distributor, the packaging is expected to be uniform and stackable, she explains. “It can be a nightmare because every farmer is packing their products out differently.” Plus, very often the farmer is expected to absorb the extra price of packaging and labour costs involved with labelling every box of food.

In reaction to these problems and many other difficulties specific to local food distribution, a bottom-up economy is slowly developing in B.C., in which farmers, facilitated by non-profit farmers’ market organizations, community-supported agriculture (CSA) programs and bulk-buying co-operatives, are drawn closer to the restaurants and consumers who buy their products. One new project spearheaded by Carlson’s Harvest Community Foods is a weekly CSA program and a direct-to-consumer seasonal fruit and vegetable delivery service. The program has a $20 weekly buy-in that gives each customer, sometimes referred to as a “shareholder,” a fixed amount of that week’s produce from a particular farm. Through another direct-buy initiative, Harvest sold 4,000 pounds of fresh blueberries from Gelderman Farms directly to consumers last summer. As a huge truck pulled up in front of Community Foods’ Union Street storefront, hundreds of boxes were unloaded, stacked and picked up by customers who had reserved them by email or on a sign-up sheet. This example of a mini-hub, says Carlson, could be the future of how food makes it off a farm into kitchens at a fair price for both the farmer and customer.

For Darren Stott, a former director of purchasing at Sustainable Produce Urban Delivery Inc., or SPUD, a mini-hub isn’t good enough. He’s the business-plan lead for Local Food First’s New City Market project, an ambitious concept for a large permanent distribution centre, market and community space. The plan was conceived by Vancouver food advocates in an effort to ease the obvious bottleneck between consumers and producers of local food. Still in the planning stages, New City Market is envisioned as a massive brick-and-mortar farmers’ market facility that will also host every ancillary food service imaginable, from food preparation facilities to cold storage to rentable banquet space.

“Farmers were looking for other channels to sell their product, or being asked to sell more produce to grocery stores and restaurants,” says Stott. “A lot of farmers who could grow enough and rent more fields were spending a lot of time driving to the farmers’ markets, driving back into town to deliver to restaurants, doing deliveries, answering the phone and so on.” In reaction, Stott says, farmers expressed a need for an aggregation hub and storage space where a distributor picks up produce and delivers it on their behalf. This is already being done in some U.S. cities, such as Sacramento, and he says the best way to accommodate demand is to ensure steady supply that treats farmers fairly and accommodates needs of the service industry.

“Chefs are saying this is going to be on their menu for the next five to 10 years, at least. They cannot get enough local food on their pricelists,” says Stott. “We found out, to our detriment at SPUD, that only a limited number of people will order food online, go to a drop-off point… or go to a farmers’ market. So we need to find a solution that works within our existing system.”

Image: Paul Joseph
Café owner Andrea Carlson sees a lot of
well intentioned but poorly prepared
entrepreneurs entering food distribution.

For Brandon Owen, a corporate executive chef with GFS B.C. Inc., one of the largest food distributors operating in the province, the growth in demand for local produce is a huge business opportunity. Since the development of GFS’s local food program, Owen says, the company has almost doubled its distribution of food from B.C. farmers from 4.5 million pounds in 2009 to eight million pounds in 2012. However, he does agree with Annamarie Klippenstein that one of the trickiest issues facing local foods is packaging and labelling requirements. For industrial-scale distribution, packages and labels of fruits and vegetables must conform to federal and provincial requirements, as well as the needs of a distributor’s customers.

The existing industrial food system is slick and optimized for efficiency, and Owen concedes that local farmers won’t be as easy to deal with as an international conglomerate, where placing an order is as easy as sending an email. “To expect them to react to us in the same way would be ludicrous. So we have to nurture those relationships and work with those farmers. There will be lots of times when they’ll call and say they’ve had some challenges, or the cheesemaker did something wrong, and there’s no brie for the balance of the week,” says Owen. “We’ll use what we have in stock and switch over to a Camembert. Like any relationship in life, it takes work.”

That means distributors need to be the ones approaching farmers, says Owen, although he says he has experienced firsthand prejudices against those in his industry of the kind cited by farmers like the Klippensteins. “Unfortunately there are other distributors, and I’m not going to mention any names, that do that to suppliers. They do grind them into the ground; they tell them how to run their business, they demand different pack sizes, delivery dates, they penalize them,” says Owen. “They really run them into the ground [on price]. That’s where that kind of feedback would be coming from. We pride ourselves in not being that company. Is it hard to manage those relationships? Absolutely. Is it heavy lifting? Absolutely.”

In the case of Jason Pleym and Two Rivers Specialty Meats, which distributes its own meat products as well as those of other regional producers, the importance of communicating the difference between their product and mass-produced meat is the crux of the business. “All we wanted to do was to bring the farmer into the equation and try not to skin the farmer, for a whole lot of reasons,” says Pleym, who still sometimes works weekends on his family’s ranch. “It’s really important that the consumer, whether they are a chef or a straight-up civilian consumer, understands the methodology behind economies of scale. What it means is 5,000 head [of cattle] a day being killed versus 15, which is what everyone says they don’t want.”

Five years after those grinding first months in business, Two Rivers now employs 30 people, recently renovated and moved into a 7,000-square-foot warehouse space and has turned its smaller initial space into a meat-curing and sausage-making area. The company has a client list of more than 400 and fills between 300 and 500 orders a week. Pleym says part of that success comes from those long, bloody hours in his cutting space, holding up parts of the cow, thinking about the meat and how to communicate the story of the cow and the farmer to the consumer.

According to UNBC’s Connell, this increased willingness of consumers to pay more money for food with a good backstory has been an industry game-changer. “I used to write business plans for small businesses before I jumped into the academic world. And I have a great sense of hope that there’s a viable business piece here,” says Connell. “But it’s going to take that person with the classic entrepreneurial spirit.” He says it is important for non-profit groups and academics like himself to keep finding ways to help those entrepreneurs. “I don’t have blind faith in the market to meet all those needs, but if those people don’t exist now, there’s probably a reason,” says Connell. “Either the perception of risk is too high, or demand to supply and the demand aren’t sufficiently mobilized.”

In the meantime, what does the future hold for Two Rivers Meats, the scrappy processing and delivery startup? “The plan at this point is to slow the growth and try to understand the growth a bit better, to look at the market and access the market differently than we currently do,” says Pleym. “What I see changing is consumers, and how they look at their food, and how they look at buying food. The most important thing for me, if we have the ability to offer these guarantees, true guarantees, and people have the ability to trust that, then there is another market out there.” Asked if the initial riskiness of his endeavour ever discouraged him, he’s emphatic. “Failure really wasn’t an option. There was just too much on the line.”