Natural Foods Merchandiser

Distributors Co-Opt Retail's Co-op Model

Like most natural products retailers, Joe Curtis understands the tradeoffs of buying directly from vendors.

Curtis, co-owner of Papa Joe's Markets in Greater Detroit, sees direct relationships with suppliers as one of the best means he has to differentiate his two naturals/specialty foods stores. "We literally travel the world," says Curtis, "looking for unique, high-quality items that we can break into the Detroit market. We think we can get at least a couple of years of near-exclusive sales on really great new products before they show up in conventional distributor catalogs and [on] competitors' shelves."

Bringing excitement to the assortment is not the only impetus. Kevin Sharpe, assistant manager of the People's Food Co-op in Ann Arbor, Mich., buys direct to foster local economies and support sustainable agriculture. "We can support local farms and producers while cutting down on the waste of shipping from the West Coast or [from] other countries. Since a lot of these local vendors don't have the volume to go through our main distributors, going direct is the only way we can work with them."

Curtis and Sharpe are well versed in the typical hurdles of these relationships. It takes more time to place lots of little orders, and it's easier to miss a reorder and go out of stock. Direct orders also might carry high shipping costs. Finally, because direct vendors don't make regular deliveries, store managers need to pay close attention to inventory levels and carry more backstock than they would like.

However, a unique new distribution system might make all of this much easier for Papa Joe's, People's Food Co-op and other naturals retailers. A group of farmers and small-scale processors from Michigan's Upper Peninsula in March launched Big North Specialty Foods, a marketing and distribution company organized as a cooperative.

Big North's members include a buffalo rancher, a fresh- and processed-fish supplier, an organic fruit farmer, a maple syrup producer, and a manufacturer of organic preserves and relishes. The member-owners have consolidated ordering and distribution into a single point of contact. A truck goes out every week from St. Ignace, Mich., to make deliveries to stores throughout southern Michigan and northern Ohio.

One of Big North's founding members is Timothy Young, owner of Food for Thought Inc. "We knew there was a market out there for these unique natural food products," Young says, picking up a jar of certified organic pickled wild leeks. "This represents a taste of the North Woods to people in southern Michigan, but we were having to increase the price so much to cover shipping that retailers couldn't afford to put this item on the shelves."

Quality was also an issue. Handcrafted certified organic preserves and maple syrup (to say nothing of fresh lake trout and buffalo steaks) were losing their peak organoleptic qualities by sitting on hot trucks or distributors' shelves. Now Big North products are delivered to a central warehouse the night before a shipment goes out. They then travel by refrigerated truck directly to retail shelves.

"By being in the stores every week, we can give the kind of sales and merchandising support that we could never give before," says Big North member Mike Ross, owner of RMG Family Sugarbush. "We can make sure the shelves are filled, can take back returns, can set up demos and tastings ... it's really great."

Joe Curtis agrees. "Big North Specialty Foods is being handled totally differently from a typical direct buy. That somebody is standing behind the product for marketing and merchandising while saving me time and money is tremendous."

According to Dave Gutknecht, editor of Cooperative Grocer magazine, the BNSF distribution concept is fairly original. "Distribution is still the unsolved piece for small-scale marketing cooperatives." Big North Specialty Foods demonstrates one way to create a better direct-buy relationship for natural products retailers.

Sherwood Smith is the president of Blue Sky Marketing, a full-service marketing firm in Traverse City, Mich., serving the natural products industry. Smith specializes in market research, marketing channel management and marketing strategy. He can be reached at [email protected].

Natural Foods Merchandiser volume XXIV/number 7/p. 16

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