Growing Pains: The organic food industry in Alberta is caught in a classic catch-22 by Gina Teel
Calgary Herald, December 17, 2006

Organics, once the sole domain of Birkenstocks and mother earth types, is becoming increasingly mainstream as health-conscious consumers seek out alternatives to conventionally produced food.

But the industry itself appears to have some distance to go before it becomes mainstream in Alberta.

The province's burgeoning certified organic industry is in a classic catch-22 -- too few certified processors to manage what's being produced but not enough supply to make building new facilities viable.
But moving beyond this roadblock isn't as easy as it might seem.

The reasons for the stalemate are many. Convincing conventional farmers to switch to certified organic production is often tough, as the transition to certification can take up to three years.

There are new price pressures to consider as megastores move into organic retailing. Soaring input costs, the albatross of farmers everywhere, is yet another consideration.But the biggest problem is a lack of infrastructure, says Victor Chrapko, president of the Alberta Organic Producers Association. Poor infrastructure is what's preventing certified organic producers from marketing their production locally and easily, he says.

"That's always a concern when we try to encourage new producers to come on stream, they say 'where am I going to sell this stuff?' or 'what am I going to do with it?' " he says.

Tony Marshall, owner of Highwood Crossing Farm Ltd. , a certified organic grain farm south of Calgary that produces and packages food products from the crops it grows, agrees infrastructure can be an issue, especially for those organic producers located in remote regions of the province.

However, he believes what's really needed to break through the roadblock in organics is a change in attitude.

Organic farmers have to start thinking differently and break out of the traditional models, he says.

Going organic is no longer simply a matter of if you grow it, they will come. Distribution and marketing are key, Marshall says.

"I spend one per cent of my time on the tractor and 99 per cent on the telephone," he says.

Highwood Crossing's popular certified organic product line includes cold-pressed flax and canola oils, organic granola, flax seed muffin and pancake mix, stone ground flours as well as whole grains and cereals.

While Marshall is comfortable in his marketers role, he notes not everyone in agriculture is.

"One thing that we have been very good at is listening to what our customers want, and that's something that's often missed in agriculture," he says.

"Farmers traditionally are really focused on production -- how can we get another two bushel per acre yield out of this field -- and we're still very concerned about production but we're much more focused on the marketing side of it." It's a strategy that's worked well for Marshall and his wife, Penny. The couple started out growing certified organic crops and selling them to others to process.

It wasn't long before the Marshalls realized they'd be better off to capture that value themselves, and they added certified organic processing to their business, starting with fresh pressed oils.

By wearing his marketer's hat, Marshall was able to leverage the fresh concept of their pressed oils and aligned the Highwood Crossing brand with complimentary niches, like the popular slow-food movement.

Simply put, Marshall says he's taken their product and made it something different and branded it in the same way as a running shoe or an iPod.

The market has responded well. The Marshalls continue to handle distribution at a local level (95 per cent of their business is done in Alberta) but have recently formed an alliance with a local food broker to get their products into the chain distribution at Safeway and Calgary Co-op, for example.

Rosalie Cunningham, a consumer and market analyst with Alberta Agriculture, agrees producers could benefit from bolstering their marketing skills.

This is especially true if they aspire to diversify and value-add their production with an eye to becoming more of a price setter and less of a price taker.

Before they can do that, however, Cunningham suggests some producers may first have to adjust their perception what marketing is.

"Marketing is often perceived as a used car salesman and, really, marketing is just telling your story and building relationships," she says.

Marketing is a way for organic producers to better connect with consumers, and that relationship is key, says Cunningham, who is putting the finishing touches on a study of the organics industry in Alberta and Canada.

Cunningham notes existing research on the organic consumer shows there are three triggers that get consumers into organics: children, health conditions and their social network.

But the type of consumer that purchases organic food is changing; it's no longer limited to a core group of the population.

Indeed Cunningham's own consumer polling shows the organic market is growing. Today's organic consumer is not that different from the Canadian consumer, she says.

"It's not your Birkenstock sandals, but I think that many people still believe that because that's your core," she says.

Cunningham says, in Canada, 46 per cent of organics is bought at the grocery store while 30 per cent is purchased from a farmers' market or direct marketing.

If producers want to meet the growing consumer demand for organics, she suggests they'll have to work together as a group, perhaps even across provincial borders, in order to match the supply that's going to be required to go into a grocery store.

They'll also have to be much more involved in the marketing process.

Cunningham says organics might not be an option for everyone, but the market signals are there.

"It is a small portion of the larger market, but it's still a portion and it's a portion that is growing . . . and the consumer wants it," she says.

According to Canadian Organic Growers Inc., there were 238 certified organic producers in Alberta in 2005, a 4.7 per cent drop from the 254 reported in 2004.

The all-time high was 330 producers in 2001. There were 3,618 certified organic farmers in Canada last year.

Certified organic farms represented 0.5 per cent of all the farms in Alberta in 2005. Field crops made up the biggest production, followed by livestock and vegetables and fruit, says the association's recent report, the State of Organic Production in Canada in 2005. There are 41 certified processors and 17 certified handlers and traders in Alberta, representing seven per cent of the Canadian total. The value of certified organic production was reported at $4.6 million in gross sales, but the association notes data are missing for a majority of Alberta's producers.

Value of production is a hard figure to peg accurately because the industry is largely self-reporting.

(Alberta Agriculture's Cunningham concurs the figure is difficult to get. She notes of her surveys sent to Alberta's 238 certified organic producers, just 156 were returned. Of those, five refused to answer the question on cash receipts directly. In total, 62 surveys weren't returned, 19 were refused, and one was unusable.)

Laura Telford, executive director of Canadian Organic Growers, says it's a bit of a mystery why organics isn't doing better in Alberta.

Although Alberta doesn't have the regulatory regime that's supporting growth in British Columbia -- the hottest organic growing place in Canada -- neither does Saskatchewan, yet its organic industry is growing more.

"I'm not getting it because we're seeing more organic consumers in the big cities of Alberta; Edmonton and Calgary have really healthy farmers' market sectors and you don't have those in Regina or Saskatoon, so it's kind of strange," Telford says.

As agriculture is largely a provincial jurisdiction, it's up to each province to create its own regulations. (The federal government recently introduced a federal organic regulation, but it's just a draft and not yet law.)

Currently, B.C. and Quebec have their own provincial organic regulations and that's where the strongest industries are, she says.

Telford notes the regulation itself isn't the big deal, it's the government support that usually comes with it; not in terms of direct dollars to farmers but programs to help farmers transition. "They're doing that kind of thing in B.C. and Quebec, we don't see it elsewhere," she says.

After regulation, Telford says, there needs to be more marketing to build the domestic organic market, because that's where the opportunities are.

"Eighty to 90 per cent of the food consumed in places like Alberta is from outside our borders," she notes.

While some view the advent of mega-stores into organic retailing as a detriment, Keri Sharpe, business development officer, organics, Alberta Agriculture, sees it more as an opportunity.

It's likely that core group of organic consumers won't be buying their groceries at mega-stores. Instead they'll purposely seek out the local, slow food environmentally conscious organic producers and buy from them.

Sharpe says she's seeing that knowledge and that core group of consumers trying to come together to deal with some of those infrastructure issues

"Because whether you buy beef in Alberta and have to ship it across Alberta [to a certified organic facility], it's still better than buying it from Ontario," Sharpe says.

While she agrees infrastructure is the gap in Alberta's organics industry, Sharpe notes if producers can get the big grocery stores to agree to market locally, the processors will come on line if there's money in it.
Moreover, if Alberta could get some federal plants, the product could then be sold anywhere.

Moving Alberta's organics industry to the next level will require work on the producer end, but Sharpe says consumers need to take some responsibility, too, and ask for organics.

Sharpe says one of the biggest perceived drawbacks to organics is price. Interestingly, that's not an issue once consumers make the switch.

Consumers often forget the reason the other food is cheaper is the volume, or the economies of scale, she says.

"And they forget that if Joe Smith on his two acres is growing tomatoes, he's not going to compete with California price wise," Sharpe says.