Livelocal AB

Local Food in Alberta
SITUATIONAL ASSESSMENT FOR GOOD FOOD BOX
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ONE PARAGRAPH PRECIS
Local food is emergent and complex. Driven by interest in healthy food and desire to
support farmers, consumers pay premiums for locally-sourced and processed foods.
Balancing price against expectations around quality, variety, and timeliness is
challenging. Keeping price down, through efficiencies in transportation and
aggregation, will allow local food providers to compete while quality and variety is
built.
PURPOSE OF THIS DOCUMENT

This document describes the context of local food in Alberta, Canada and North
America. It outlines the trends and drivers that influence opportunities in local food.
It translates some of the implications of these trends and drivers to identify
implications for business in the local food space.
This is part of a puzzle. It acts as a foundation for the market analysis and market
planning that follows. It informs investment and complements business plans and
risk analysis.
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EXECUTIVE SNAPSHOT
Local opportunity Demand drivers

Alternative business options
- Locally-grown produce is number one - Fine restaurants promote fresh, local
- If local food preserves 50 cents
menu trend of 2010. food that tastes better.
that was previously lost to
- In 2002, local food sales were $4 billion in - Shorter transportation preserves farmers, this should be reflected
U.S. $7 billion expected in 2011. nutrients and health benefits. in prices and business models.
- Alberta’s alternative agriculture markets - Tracking food sources and production - Charging five to 20 percent
generated $964 million in 2004. practices generate premiums. premiums when quality is low
and supply is building is short-
- Retail gaints and institutional procurement - Producers making $250/acre grow
sighted.
are growth markets. income to $3,000/acre.
- Drive deep into reduced
- A dollar spent on local business yields
distribution costs and higher
$2 to $4 in local economy.
efficiency to compete on price,
enhance quality and support
Global trends local farms.
Challenges
- Food deserts spreading in large cities.
- Pricing of local food must balance
Only 11 percent of Alberta families have
premiums against quality and supply
adequate, nutritious food.
constraints.
- Farm income fell from $33,000 in mid-70’s
- Of 73 cents going to transport, 50 cents
to losses of $10,000 per year today.
can be preserved in local food markets.
- For each dollar of production sold, farms
- Fast-growing markets are
keep just seven cents. 73 cents go to
underserviced. Focus on export markets
transportation.
stunted or eliminated capacity in local
- Conventional food supply chains are markets.
2,400 km long. Local food travels 72 km.
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1. LOCAL FOOD IS AN EMERGING OPPORTUNITY
Local food networks are emerging in Edmonton
Never eat more than you and across North America. Their growth is driven
can lift. by the heavy burden of the current food system
~Miss Piggy~ and its consequences on health, nutrition, and
environmental sustainability. There is also a strong
interest in supporting farms and local economies.
Local food presents a complex set of challenges that include: unconventional
business models, overlapping societal issues, complicated logistical requirements,
transportation and storage constraints, and unique marketing/retail opportunities.
In 2007, the cover of Time magazine proclaimed: “Forget Organic, Eat Local.”1 That
same year, Oxford dictionary named “locavore” the word of the year.2 Editors of the
FoodChannel.com ranked “local” as the number one food influencers of the decade3
and top three trend for 2011.4
But what is local food?

Definitions of “local” are as diverse as the places they refer to. To some, local food is
locally produced and processed and the business is locally owned. Other definitions
require that the production methods are sustainable and are environmentally and
socially responsible.
The definition is important. It impacts how consumers and the public perceive local
food. That perception influences demand.
Some consumers buy local because they want to help small farmers, others buy local
because they care how animals are treated during production. These characteristics
have little to do with the proximity of the food, but are often intertwined with
perceptions of local food.
Consumers are concerned about quality, freshness and price. They also care about
public issues such as climate change, improved health or the local economy. All these
elements define the character of “local food”.5
“Local” is a set of characteristics that, if positioned correctly, can achieve market
performance outcomes. And in terms of procuring investment, identifying
performance outcomes is important. Government is interested in outcomes that have
proven public benefits and warrant public investment i.e. reducing carbon emissions
1
Time magazine, March 12, 2007.
2
Oxford University Press, November 12, 2007, http://blog.oup.com/2007/11/locavore/
3
Local Food System Assessment for Northern Virginia, pg 11, 2010 – The Wallace Center
4
The Food Channel, November 20, 2010, http://www.foodchannel.com/articles/article/top-ten-
food-trends-2011/
5
Just What Does Local Mean? Michael S. Hand and Stephen Martinez, Choices Magazine 1st
Quarter 2010 25(1)
Page 1 of 10 SIFT EVERY THING
or addressing health issues. Private investors are interested in market potential and
significant upside opportunity.
Market potential
Mintel, a leading U.S. market research company that tracks consumer purchase and
lifestyle trends, believes in local food. “Local procurement is a fast-growing category
with tremendous promise, and marketers that are aware of the many dynamics at play
can generate significant revenues.”6
A survey of chefs by the U.S. National Restaurant Association rank locally grown
produce as the number one menu trend of 2010 and 2011.7 According to their
research “89 percent of fine-dining operators serve locally sourced items, and most
of them believe demand for locally sourced items will continue to grow.”
In the United States local food sales were $4 billion in 2002 and estimated to reach
up to $7 billion in 2011.8 A separate, more recent study measured local food sales at
$5 billion in 2007.9
In 2007, Alberta consumers spent $9.9 billion in supermarkets and grocery stories
and $6.5 billion in food service and drinking establishments.10
Local opportunity
Across Canada, local food is growing. Initiatives range from farmers’ markets,
community supported agriculture, local food in grocery chains, institutional
procurement, restaurant and chef initiatives, culinary tourism, to food box programs.
Farmers markets are one of the most common places to purchase local food. The
number of markets in Canada has doubled since the late 1980’s.
Farmers markets are springing up in rural communities and growing in large urban
centers like Toronto and Vancouver. In 2007, six new markets were added in
Toronto. Your Local Farmers Market in Vancouver grew from $1.2 million in sales
in 2005 to a projected $3 million in 2008.11
“The Alberta Agriculture, Food and Rural Development estimated the total value of
the province’s alternative agricultural markets, including farmers’ markets, regional
cuisine initiatives, on-farm and off-farm activities, to be $963.6 million in 2004. In
British Columbia, farmers’ markets generated sales of $65.3 million and an additional
6
7
National Restaurant Association, December 2, 2010,
http://www.restaurant.org/pressroom/pressrelease/?ID=2025
8
Worldwatch Institute: Is Local Food Better? Pg 1
9
Filling in the Gaps: Eight Things to Recognize about Farm-direct Marketing, Choices Magazine
2010, 25(1).
10
December 22, 2010, http://www.thinklocal.ca/Province/Alberta.htm
11
Local Food Initiatives in Canada – An overview and Policy Recommendations, 2008, Canadian
Cooperative Association
$53 million in spin-off sales in neighboring businesses in 2006. Ten cooperative
farmers markets in Nova Scotia contribute $62 million dollars a year to the provincial
economy, while in Ontario, 130 farmers’ markets generated an estimated $645 million
in total farmers' market sales across Ontario in 2006.”12
Retail giants, such as Walmart, are climbing on board and providing locally sourced
food. They claim that 20 percent of fruits and vegetables sold in summer months, by
their U.S. stores, are grown in the state where they are sold.13
Fiesta Farms, Toronto’s largest independently owned supermarket, profiles Local
Food Plus and makes their items available in their retail store. Co-op Atlantic grocery
store chain in Atlantic Canada partners with local farmers to market and sell their
products in their community-owned stores.14
Institutional procurement is another area of growth within the local food
movement. For example, The University of Toronto sources 15 percent of its food
from Ontario and the City of Toronto is looking at a 50 percent local food
procurement policy for city-operated day-care centers, nursing homes and other
venues.
In the U.S., some states are adopting local procurement policies in prisons and post-
secondary institutions.15
Multi-faceted opportunity
There is a range of angles for approaching “local food”. Food that is sustainable,
locally-sourced, and of higher quality creates premiums. Producers can approach the
market directly, as in farmers markets, or indirectly through giant retailers. Local
supply companies, like Edmonton’s Good Food Box, can target households,
institutional procurement or restaurants.
The choice of approach will define the optimal business model. But regardless of that
choice, there are several influential global trends and market drivers.
12
Local Food Initiatives in Canada – An Overview and Policy Recommendations, June 2008, pg
9, Canadian Cooperative Association
13 st
Can Local Go Mainstream?, Choices Magazine 1 Quarter 2010 25(1)
14
15
2. GLOBAL TRENDS IMPACTING LOCAL FOOD
Health and nutrition
We may find in the long run that tinned food is a deadlier

weapon than the machine-gun.
~George Orwell~
“Food deserts” are spreading in large cities – neighborhoods where there is no access
to good food. Ruled by convenience stores, gas stations and fast food, these
communities are nutritional wastelands contributing the obesity and other food-
related epidemics.
A report, by the Alberta Agriculture Food and Rural Development, states that
obesity is progressing rapidly in the province and is an overwhelming public
concern.16
Back in 2004, The Heart and Stroke Foundation of Canada stated, “The increasing
number of overweight and obese Canadians now poses one of the greatest threats
ever to public health in this country”.17 According to statistics cited by Alberta
Agriculture, the problem is worse in Alberta than other parts of Canada.18
Ensuring access to nutritious food is fundamental to tackling health issues. But only
11 percent of Alberta families have access to adequate, nutritious food.19 It costs
almost $775 per month for a family of four to eat a healthy basket of food – most
cannot afford this.
The U.S. government has started to recognize the benefits of local food through
various forms of subsidies under U.S. Health and Wellness. All 50 states have their
own agricultural marketing programs to promote local food and agricultural
products.
Farm income crisis

Maximizing farm income is, perhaps, the largest opportunity for local food in
Alberta. Local food markets provide a potential solution for the farm income.
Farmers find it increasingly difficult to make a living growing food.20 Figure 1 shows
how acute the issue of farm income is today.
16
Alberta Agriculture: Canadian Consumer Trends in Obesity and Food Consumption, pg 1
17
2004 Annual Report Card on Canadians Health, Heart and Stroke Foundation,
18
Alberta Agriculture: Canadian Consumer Trends in Obesity and Food Consumption, pg 2.
19
Cost of Eating in Alberta 2008 pg. 4
20
Menu 2020: Ten good food ideas for Ontario
Market Net Income of Canadian Farms: 1926-2005
$40,000
Dollars per farm (adjusted to 2005 dollars)

$30,000
$20,000
$10,000
$0
-$10,000
-$20,000
1926
1931
1936
1941
1946
1951
1956
1961
1966
1971
1976
1981
1986
1991
1996
2001
!"#$%&'#()*%'&+%&*,-$!"().%'&+%.**%/"&&*/0&-%#$)"(-$%1""+%
Figure 1: Sharing Food Down the Road
21
'.%/*&#)'2%#"%.'0.13,&-%#$'#%+*.,)*4%
From a!"#$%&&$'()*)$#)%*"+*$'(,*$-"./0)+'$,*$0"#)$%1"/'$)+."/#%2)0)+'$
high of about $33,000 in the mid-70’s, farm income has plummeted to losses
of $10,000 per year.22
'(%+$3)#*/%*,"+4$0"#)$%1"/'$,-)%*$'(%+$%#2/0)+'*4$%+-$0"#)$%1"/'$
!"#$%&!'(%)$'*+
In Alberta reduced income is pushing small farms out of business. From 2001 to
2006, the number of farms fell by eight percent and the number of farm operators
fell by six percent. Asfrom
Leadership the number of farms declined, the size has increased. In 2001,
Farmers
s more than a business or the
even average farm size was 970 acres. By 2006, farm size increased to 1,055 acres.
23
te personal commitment to an !"#$#%&'%(%)*&#+%$#,-.*/-0%"(11#0&02%&0%+"#%3454%(06%&+%&'%7-00#7+#6%
To sustain their farming enterprises, 55 percent of all Alberta farm operators have
far more than a lifestyle, some- +-%.-7(.%8--64%9"#+"#$%&0%8(:&.;%:#(.'%-$%&0%$#'+(*$(0+'<%=:#$&7(0'%
off-farm
put on and off like a fashion ac- income.24
($#%#0>-;&02%+"#%6#.&7&-*'%+('+#%-8%.-7(.%6(&$;<%,#2#+(?.#'%(06%8$*&+'4%
arming is a fundamental human @($:#$'%:($A#+'%($#%'1$&02&02%*1%&0%+-B0'%(06%7&/#'%(7$-''%+"#%
These trends are compounded by rising input costs and regulatory compliance. At
s basic as loving and eating.
7-*0+$;4%C($#0+'%(06%+#(7"#$'%($#%'*11-$/02%:-$#%.-7(.%8--6%&0%'7"--.%
the same time, consumers continue to spend less on food (falling from 24 percent in
7(8#+#$&('4%D-::*0&+;%2($6#0'%(06%*$?(0%8($:&02%($#%2$-B&02%8--6%
1960 to&0%7&/#'<%(06%:-$#%(06%:-$#%'-*1%A&+7"#0'%(06%8--6%?(0A'%($#%*'&02%
11 percent today). Farmers need a solution and, as we show in this analysis,
mplete Peter Mann articlelocal 1$-6*7#%8$-:%.-7(.%(06%$#2&-0(.%8($:#$'%+-%:##+%+"#%#:#$2#07;%0##6'%
go food might be a viable option.
orldhungeryear.org/fslc/faqs/ -8%"*02$;%=:#$&7(0'4%
p\
Environmental sustainability
56*#*)%7'&&8%9")2+%:(&-*)%;*')<.%=&#*)&'0"&'2%>,)*/#")4%
aring FDTR
Interest in environmental sustainability is often drives buyers to local food. Carbon-
conscious consumers buy local to reduce carbon emissions by minimizing the
distance their food travels before reaching them.
In 2005, an Iowa researcher estimated that the ingredients in a carton of yoghurt
collectively travel 3,558 kilometers just to reach the processing plant25. Another 2001
21
Pg. 8, National Farmers Union
22
Sharing Food Down the Road, Pg. 8, National Farmers Union
23
Statistics Canada, http://www.statcan.gc.ca/cara2006/analysis-analyses/ablerta-eng.htm
24
Statistics Canada, http://www.statcan.gc.ca/cara2006/analysis-analyses/ablerta-eng.htm
Iowa study sampled a basket of 28 fruits and vegetables found in an Iowa grocery
store and measured the average distance travelled to market via conventional
distributional systems. The average distance was 2,400 kilometers26. Locally sourced
food travels just 72 kilometers.
These figures not only have implications for climate change but also underscore the
difficulty in obtaining fresh food through conventional systems.
Over the last 30 years, conventional agriculture systems have shifted to heavy
pesticides and mono-culture crops. The practices are driven by thin margins and,
without local markets, are generally the only way to maximize profits. These practices
all have environmental consequences and are generally not sustainable in the long-
term.
3. DRIVERS OF CONSUMER PREFERENCE FOR LOCAL FOOD
Better taste
One of the first things people associate local foods with is better taste. Many fine-
dining establishments promote their use of fresh, locally grown food giving the
perception that local tastes better.27 Market research surveys have also found that
better taste is one of the many reasons cited for buying local.
Better nutrition
In addition to better taste, more consumers are demanding food with better
nutrition. Food with shorter transportation distances mean less loss of nutrients and
therefore greater health benefits for the consumer.28
Better nutrition is also related to how foods are produced and processed. More
consumers are interested in products that are free of hormones and pesticides
because they are concerned about the impact on their health. Local food and a
connection to the farmer provide consumers with a greater satisfaction that their
food is healthy and safe.
Better security
As nations find ways to thwart airline bombers and financial threats, concern about
food supply rises. These systems are vulnerable to shortage of inputs and
25
Rich Pirog and Benjamin, A. Calculating food miles for a multiple ingredient food product.
Leopold Center for Sustainable Agriculture, March, 2005, pg. 12
26
Pirog, Rich, et al. 2001. “Food, Fuel, and Freeways”. Ames, Iowa: Leopold Center for
Sustainable Agriculture, Iowa State University.
27
Michael Shuman, Community Food Enterprise: Local success in a global marketplace, Wallace
Center and Winrock International, 2009, pg. 8
28

contamination of supply. Shorter supply chains and local food are often seen as ways
reduce security risks.
But beyond these nightmarish scenarios lives more mundane issues of food security.
Tracking the source of food and the practices used in its production is important to
consumers. In more sophisticated markets, like those in the UK, the ability to
provide information in these areas is generating premiums.29
Better for farms and communities

One of the major interests of local-food consumers is a desire to support local farms.
Local food systems have a significant impact on farm income. In North Virginia, a
producer of livestock feed, grains, commodity corn and soybeans will yield, on
average, $250/acre. The same producer can exceed $3,000/acre with net margins of
five to 10 percent by switching to fruits and vegetables demanded by local markets.30
Buying local food also promotes local economic development. Numerous studies
document that a dollar spent on a local business yields two to four times the
“economic multiplier” as an equivalent nonlocal business.31
Local food promotes relationship among community members. This has wide-spread
benefits. Communities that cultivate local business often have greater civic welfare,
less social strife, and greater equality.32
4. CHALLENGES IN FRONT OF LOCAL FOOD
Pricing
Local food is generally more expensive than conventionally sourced food (such as
large grocery stores). Consumers pay premiums for variety, timely delivery, and
quality. They are interested in supporting local farms and encouraging environmental
sustainability.
Balancing premiums against competitive alternatives (like conventional food supply)
is always tenuous. An understanding of the underlying economics should influence
decisions on the pricing of local food.
Price is driven by transportation costs
For every dollar of farm produce sold to conventional markets, 73 cents goes to
distribution.33 Transportation is a huge cost. It drives the business model of large
grocery chains like Safeway and Sobeys.
29
Chris Benfield, Traceability is name of the game for a premium, Yorkshire Post, January 30,
2009, http://www.yorkshirepost.co.uk/farming-news/Traceability-is-name-of-the.4933026.jp
30
31
32
Big companies purchase and sell large volumes of product to compete on margins.
They achieve lower costs per unit by increasing volume.
Small scale of local food cannot achieve the same volumes as the large grocery
chains. Creative distribution methods that generate efficiencies are needed.
Locally sourced food means less transportation. Oklahoma Food Cooperative
reduced distribution costs to 20 cents on the dollar, which means lower prices for
consumers and more income for farmers.34 If 73 cents was previously going to
distribution, local food frees up around 50 cents.
Farmer Girls, Local Flavor Farm Buyers Club, and Horse and Buggy Produce break
the transportation challenge even further by giving it to their customers. These local
food companies let farmers showcase their product online and customers can
purchase online. The company prepares the orders and places them for pick-up at
various drop-off locations.35
Spreading market options

Basis Foods in Manhattan offers localized, fully traceable food products that are
competitively priced.
They offer online ordering and weekly grocery delivery service for individuals
through their “Good Food to You” program. Membership fees are determined by the
amount spent per month or on a pay-as-you format. Delivery charges are added to
each order and the amount depends on whether the order is door-to-door delivery
or a common drop-off point. For those that prefer traditional avenues, Basis offers
small retail stores stocked exclusively with local farm products.
They also supply more than 20,000 restaurants and institutions in the area through
their wholesale division. Participating farms identify product available each week for
sale and Basis collects orders from wholesale customers. Basis picks up the
product from the farmer and delivers it directly to wholesale customers.
Aggregate for efficiency

Aggregation facilities also offer alternatives for efficiency. A study from North
Virginia highlights the opportunity for local food providers to share the cost of
packing and distribution. This emerging industry reveals unmet needs to aggregate
people, knowledge and resources.36
FarmsReach, a local food group from San Francisco, held a workshop to determine
why, despite growing demand, regional food systems are not scaling up more quickly.
Initially, they believed that the problem was due to a lack of efficiency in the
marketplace. However the outcome from the workshop revealed that the more
33
Center and Winrock International, 2009.
34
35
36
urgent need is helping farms prepare for market. Tools and educations are needed to
assist with pricing, packing, food safety compliance, planning, and group
purchasing.37
Aggregating resources
Common Market is a local food distribution center in Philadelphia that built its
entire business model on removing access issues to local farms for universities,
hospitals, and grocery stores.
The center started with a group interested in getting local farm products into the
city, especially to lower income families. After conducting a feasibility study, they
found that institutions, while posing many challenges, offered the greatest
opportunity for local farmers. There were many insurance, regulatory, and licensing
requirements that most farmers did not have the resources to negotiate. Common
Market meets these requirements for the farmer and gives them access to a whole
new market for their products.
On the buyers’ side, Common Market consolidates and manages supply to provide
the quantities institutional customers need. The volume and scalability of the
institutional market provides the benefits of increased stability and reduced risk to
the farmers that they may not find elsewhere.
Capacity
Even though demand for local food is growing, it remains challenging to aggregate
sufficient supply to meet demand. Available infrastructure cannot support existing
potential.
For many years agricultural markets focused on export markets. This focus stunted
and, in some cases, eliminated the ability to provide local food. Many regional and
local processing, packaging, and distribution hubs were shut down. The ones that do
exist are large-scale and do not have the ability to meet local market demand.
Fast-growing local markets are underserviced. Small and medium-size processing and
distribution plants are in short supply. In Ontario, there is resurgence toward the
development of local capacity. (Menu 2010 – DOUBLE CHECK THIS
SOURCE).38
Some groups have solved the supply aggregation problem by organizing producer
cooperatives. Producers pay to use processing and packing plant facilities and profits
from the cooperative are distributed (READ MORE AND SITE PAGE FROM
SCHUMMAN).39
Investment is required to re-build or create a supply chain that will enable more
widespread growth in local food.
37
FarmsReach, http://www.farmsreach.com/welcome/about/index.html, last accessed December
22, 2010.
38
Menu 2020: Ten good food ideas for Ontario
39
Investing in capacity
Om Organics began as a farm-to-restaurant cooperative network that helped
farmers with sales and delivery of their product to restaurant chefs. They have since
grown into an online resource for information about organics and sustainability – with
everything from in-season products and how to use them to local food and farming
events.
Om Organics’ experience and learning in local food led them to develop a suite of
tools called “Farmsreach.com”. These pre-market tools help farmers with pricing,
packaging, food safety, planning and purchasing.
5. ALTERNATIVE BUSINESS OPTIONS
Choose the market (or not)

There are several alternative markets emerging in Edmonton and Alberta. In this
analysis we give examples of companies succeeding in all of them in other places.
Good Food Box can continue to focus on individual households. It can also expand,
as Common Market has done, to serve institutional buyers. Business planning should
consider the logistical and operational requirements of these alternative paths.
Focus on information
With so much attention on supporting farms, it is important to share information on
the relationship between Good Food Box and the producers in its network. Being
able to directly link business with individual producers will solidify the importance of
local food in Edmonton.
In recognition of how nascent local food is in Alberta and North America, becoming
a resource is an option worth considering. This could be particularly valuable if Good
Food Box pursues opportunities to sell or license its systems/technologies.
Allocate premiums
Today, the farm keeps just seven cents (in 1900, they kept 40) of every dollars-worth
of produce sold. Our evidence suggests its possible to keep about 50 cents of the 73
that farmers usually lose to conventional food supply. It also means that targeting
premiums (five to 20 percent) on top of traditional food retail might be misguided.
Driving deep into reduced distribution costs and higher efficiencies means that local
food can compete on price while delivering enhanced quality and supporting local
farms.
!

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Local Food in Alberta

SITUATIONAL ASSESSMENT FOR GOOD FOOD BOX

SIFT EVERY THING

PURPOSE OF THIS DOCUMENT

SIFT EVERY THING

Local opportunity Demand drivers

SIFT EVERY THING

But what is local food?

Health and nutrition

We may find in the long run that tinned food is a deadlier

Farm income crisis

Dollars per farm (adjusted to 2005 dollars)

3. DRIVERS OF CONSUMER PREFERENCE FOR LOCAL FOOD

Page 6 of 10 SIFT EVERY THING

Better for farms and communities

4. CHALLENGES IN FRONT OF LOCAL FOOD

Spreading market options

Aggregate for efficiency

5. ALTERNATIVE BUSINESS OPTIONS

Choose the market (or not)

Page 10 of 10 SIFT EVERY THING

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