Business sprouts for local growers: Profits grow on the appeal of hometown food
Every weekend, Kelli Lewton-Secondino and her crew of chefs pull 16-hour days, preparing meals for more than 100 customers signed up with Royal Oak-based Pure Food 2 U.
The seven-month-old food-delivery service is an extension of Lewton-Secondino's existing business, Royal Oak's 2 Unique Catering, but with a new take. The chef had long been an advocate of locally grown, organic foods, and was ready to start a business modeled on her increasing conviction that healthy eating was the way to go.
With revenue for Pure Food's first year projected at $550,000, Lewton-Secondino found a growing market of diners with a taste for fresh, healthy meals but a dearth of kitchen time.Businesses like Pure Food are at the leading edge of a national demand for locally grown foods that's spawning new businesses and increasing demand at existing operations.
It's a trend that's too new to have produced much hard data, but from grocers to farmers to state agencies, mention the increasing demand for local food and you'll get a nod of recognition.“If you go back to leaders like (national organic and gourmet grocer) Whole Foods Market, they've been talking about local and doing it for at least three or four years, but in the last year, we're seeing it kind of explode on the consciousness,” said Neil Stern, a senior partner with McMillan Doolittle L.L.P., a Chicago-based retail consulting firm.
At Southfield-based Hiller's Markets' seven area stores, local foods are marked with a mitt that represents Michigan, said Larry Krispin, grocery buyer for the chain.“I think people are trying to buy more Michigan products and support Michigan, and I think it's really taken hold just in the last year,” he said. According to Hiller's Market, during the last fiscal year local products accounted for $16 million in revenue out of the store's total 2007 revenue of $170 million. Krispin said the stores work with more than 100 Michigan companies.“We're seeing a lot more interest from a wide variety of sources,” said Dan Carmody, Eastern Market Corp. president and CEO.“We have a steady stream of groups like local colleges and health care providers trying to source more food locally, and we've had a number of initiatives we're working on with our fellow not-for-profits to improve accessibility of local food through nontraditional sources of food distribution.”
The market's wholesale operation is about 90 percent locally grown food, he said, while the Saturday market that's open to the public can be 40 to 80 percent local, depending on the time of year
.And profits are growing all the way down the food chain.Michelle Lutz, co-owner of Maple Creek Farm in Yale, west of Port Huron, said she's looking for revenue to grow from $430,000 in 2006, her best year to date, to a projected $550,000 this year. Maple Creek lost $170,000 in 2007, the victim of a severe season-long drought.
Lutz sells to high-end stores throughout the metro area like Orchard Lake-based Plum Market, to restaurants and also to individual customers through retail sales and farmers' markets like Royal Oak's.
“It's not abnormal for me to move 20 tons of produce or more a week during the (growing) season, and to a small family organic farmer that's a lot,” she said.Expenses at an organic operation such as hers typically exceed those at mainstream farms, but Lutz said she's able to compensate for the higher labor outlay to some degree because she doesn't use costly petroleum-based fertilizer or pesticides, and tries to keep costs comparable to mainstream producers.
But Lutz is selling more than produce. Part of the sticker price includes a sense of security about the product,“If I can get close to what (the average mainstream) consumer is paying, I find people don't mind giving their money to me,” she said.
Lutz said that she might earn about 30 percent of the retail price of her products at a major retailer, while at a smaller, family-owned store the split might be closer to 50-50. Restaurants are about 60-40, but she sees her greatest profits in individual, direct sales.
Most of Maple Creek's produce, she said, is sold within 80 miles of the farm with the farthest destination the Plum Market in Ann Arbor.
Smaller farms also report an increase in activity.
Robin Leonard of the Garden Patch Farm in Pinckney said she's getting about five calls a week about her eggs and produce, and Diane Franklin of Rocky Gardens CSA in Davisburg in northwest Oakland County said all 51 farm co-op shares, priced at $560 each, were sold a month after she'd opened for sales.
Franklin said her annual revenue is about $25,000, typically reinvested into the farm's infrastructure.Julie LaPorte is another entrepreneur who's capitalizing on the growing demands for local foods, providing a connection between local farmers and time-strapped consumers.
LaPorte, committed to a local diet personally, found herself making the rounds to several local farms on the weekends. When she started picking up food for friends, LaPorte realized she'd developed a business model and started Clarkston-based La Vida Local.
The fledgling home delivery service currently fills about 25 orders per week, placed online, from a database of about 100 members. Weekly revenue from her seven-month-old business hovers between $1,300 and $1,600.Cutting out the middleman allows LaPorte to sell food at a lower price than a gourmet market, though she admits her wares exceed the mainstream market price.
“Raw cheese from Whole Foods is usually around $14 a pound, but my price is about $8.50 a pound,” she said.
LaPorte said her business has been growing slowly, but that she's content to see growth that taxes neither her resources nor the capacity of the roughly 30 suppliers she works with.
Gary Kuneman, general manager of Scio Township-based Eat Local Eat Natural is hoping to fill the delivery niche on a commercial level.
Kuneman has been working on the project for about two years, building his supplier base, but started making sales calls last month.“We're chomping at the bit because we've got the suppliers,” he said.
Originally conceived as a home-delivery service, Kuneman said, his company will focus on delivering locally produced meat and dairy to restaurants throughout the area.“We want to work with the small- to medium-sized producer,” he said. “It has to be a safe product. ... Our primary objective is to make sure it's safe and raised in a sustainable manner, the farmers don't use chemicals on crops, or hormones and steroids to feed animals.”
About 40 percent of the agricultural commodities grown in Michigan are consumed in-state, said William Knudson, an agricultural economist at Michigan State University. The rest are shipped out of state or out of the country.
In a national 2006 survey of specialty food stores conducted by Chicago-based consumer, product and market research firm Mintel, 31 percent of the food items in specialty retailers were sourced within 250 miles of the store, Knudson said. Five years ago, he said, the company didn't track that statistic, a sign of the increasing prominence of local food in the marketplace.
The number of farmers' markets in the country increased by 82 percent between 1996 and 2006, with a 40 percent increase between 2002 and 2006, he said.
There's no hard and fast rule regarding in- versus out-of-state food pricing, Knudson said — factors like whether produce is in or out of season can modify the price — but for in-season produce, locally grown can be cheaper.
Monroe County-based Calder's Dairy and Farms, family-owned and -operated since 1946, is a familiar name to Southeast Michigan grocery shoppers. The dairy's brands are carried in mainstream grocery stores and are fixtures at gourmet markets.
The dairy's home-delivery service added more than 220 orders to its 1,500 home-delivery customers just in the first quarter of this year, said general manager Nicola Noble.
“Local” doesn't always mean organic, Stern said, but it offers a sense of consumer security that “outside” products may not have.
“Locally grown has so many things going for it that are perceived as positive with the consumer,” he said. “If you start with the connotation of local, it typically means it's going to be better-tasting. If you have the idealized sense of local, it's the farmers' market, which implies direct from the grower.”
Locally grown food also has a better environmental and sustainability reputation, thanks to the smaller carbon footprint required to truck foodstuffs shorter distances.
And in an age of recalls, local food may seem safer, Stern said.
“There's traceability,” he said. “If you know where food is coming from, you think it may be safer. ... That doesn't necessarily mean it's going to be safer, but the implication is, "I know where this stuff is coming from.' “Noble said that changing Calder's feed to an all-organic mix isn't financially feasible — all the farm's milk-producing cows must be fed on more costly organic feed from birth on before the dairy could qualify as organic — but said she thinks part of the appeal of the dairy is that customers are able to see the humane way cows are treated.
Ari Weinzweig, co-owner of Ann Arbor's Zingerman's Community of Businesses, has been at the head of the local, organic trend since Zingerman's Deli opened in 1982.
For Zingerman's, Weinzweig said, it's about contact.“I think our push is to know everybody we buy from, everybody we sell to, even if that's your mail-order customer,” he said.“And when we can make connections at that level it's always for the better.
Source Crain's Detroit
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