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Building an organic oat supply chain for the future

In English, this Quebec farm’s name means to make speed upwind. No wonder

Virginie and her father Bernard Lepage.

Surrounded by her parents, sister and brother, Virginie Lepage has a strong grip on Ferme Olofée, Quebec’s biggest organic oatmeal producer and processor. How big, you ask? In other words, how big can an organic oatmeal operation be? Well, annual sales are $9 million. That should answer some questions.

This clearly is a young entrepreneur who knows how to face challenges, and who knows she must prepare for others, among them the acute shortage of workers.

I have long wanted to interview Virginie and have scheduled our session well in advance. But it doesn’t start quite according to plan.

I just sit down in her office in Ferme Olofée’s new headquarters in Saint-Félicien, about six hours drive north of Montreal in the Lac Saint-Jean area, when her land line rings.

It never stops.

With the phone tight to her ear, Virginie answers the callers’ detailed questions, listing oatmeal prices or checking a computer screen for inventories and sneaking a glance at incoming emails. Finally she hangs up and turns to me. “I’m sorry,” she says. “I have not much time for you this morning. One of our employees has called in sick, I will have to replace him at the plant. I will see you in the afternoon.”

The phone never stop ringing in Virginie Lepage’s office. photo: Nicolas Mesly

It’s a lesson in how well Virginie and the Lepage family overall know this business, switching in an instant from business administration to marketing to working in the elevator.

Finding the opportunity

Ferme Olofée grows oats and other grains on 2,500 acres and contracts its grain supplies with 50 farmers, grain centres and co-ops in the region. The farm has 30 employees, the majority working at the oat-processing plant that produces oat products for human and animal consumption. The plant generates 80 per cent of sales.

I soon learn that in 2001 Virginie earned a certificate in business administration at Université du Québec à Chicoutimi, but except for three months improving her English skills at Queens University in Ontario (she tells me English is a prerequisite for anyone wanting to do serious business these days) she has never stopped working at the farm since her childhood.

Since 2000 Ferme Olofée, sales have more than quadrupled from $2 million. Virginie took over part of the family business in 2014 with her brother, Raphael, director of grain production, and her sister, Rose-Alice, director of plant quality.

The three siblings hold 60 per cent of the company while their parents retain 40 per cent of the business. As assistant CEO, Virginie looks after the sales, contracts with suppliers, and the whole financial management of the farm as well as the employees.

The Lepages are building a new grain storage and drying plant, a $1 million investment. photo: Nicolas Mesly

As she left for the plant, though, she put me in good hands, introducing me to her father 63-year-old Bernard, the CEO and founder of Ferme Olofée, and her mother Bergerette.

Bernard may be the founder, but it was Bergerette who came up with the name Olofée, which means “to ride upwind,” which says something of the family’s determination to set their own course.

The couple started in dairy production but switched to only grains in the 1980s. At that time, Bernard was obsessed with one question: Why would the Quaker Oats company come to Saint-Félicien to buy its grain?

Oats have grown well in the area since the area was first farmed by French Canadians in 1850. The grain is of excellent quality because of the lake micro-climate, long northern days and cold nights. So Bernard, who has been president of the lac Saint-Jean cash crops federation (1985-96), tells me he got the foolish idea to develop an oat supply chain with a processing plant for the whole area.

The right moment

Bernard began by producing certified seed and he developed two oats varieties — Gloria and Tango — with the help of a former researcher at Agriculture and Agri-Food Canada, Arthur McElroy.

At the same time, German and Quebec investors were looking to invest in a $7 million oat processing plant for human consumption south of Montreal, with the aim of exporting to Europe. However that project collapsed with the fall of the Berlin

Wall in 1989. Rather than invest on this side of the Atlantic, the German investors turned to the former East Germany following the reunification of the country.

Bernard sensed an opportunity. “I said to myself, why not build a plant to feed the Quebecers?”

The entrepreneur started his processing plant on the farm in the early 2000s, sinking $1.5 million into the venture. But if the financial risk was big, the technological challenge was huge.

Once harvested and cleaned, the oat grain must be hulled, which means the outer shell (hull) has to be separated from the inner kernel called the groat. The groat cannot be left nude a long time because it oxidizes like a peeled apple.

Instead, it is imperative to quickly hit the groat with heat and humidity to stop the oxidation and to produce a nice flake.

Bernard developed his technique by working with a second-hand flaking machine imported from California. “At the beginning, I was making flakes which had the texture of little pieces of plastic, but I could not call Quaker to help me!” he says. He finally got it right but he is reluctant even today to share his secret recipe which has something in common with the “Caramilk Mystery.”

Bernard is quick to add that without the support and the confidence of the Biscuits Lecler’s family who bought his first product, his project would never have materialized. Biscuits Leclerc, an iconic Quebec business, supplies the Canadian market and exports its cookies and granola bars all over the world.

Today Ferme Olofée still supplies the legendary cookies company, but also provides its quality flakes to about 10 clients including Boulangerie Vachon (Canada Bread), Boulangerie St-Méthode and Les Moulins de Soulange.

Next steps

“We are replacing my father’s flaking machine by a top new one imported from Switzerland at a cost of $300,000,” says Virginie when she is back from the plant.

Since the new generation joined the corporation, they have invested between $300,000 and as much as $1 million a year, Virginie says, confirming the numbers on her spreadsheets.

The family is also building a topnotch new Danish crop drying, handling and storage plant worth more than $1 million. Both the flake machine and the new grain centre were bought by her father and brother during a business trip in Europe.

Raphael Lepage double-checks if the hemp field can be harvested. Raphael has a diploma in farm business management with a specialization in organic agriculture from CEGEP de Victoriaville. He has visited organic farms in Western Canada, Switzerland, Australia, China and Peru. photo: Nicolas Mesly

For Virginie, the quality of that equipment is a key to their human resources policy, and to attracting and retaining top employees. “If I would not do a job, why I would ask someone to do it?” she says.

Virginie explains they are trying to hire someone responsible for human resources. It would reduce her workload, freeing her time for other strategic initiatives. The farm has just had two big losses: one of its workers was killed in a motorbike accident, and the director of the plant production, left his $80,000 salary for a new job at Produits Forestiers Résolu, the pulp and paper multinational.

Ferme Olofée salaries are competitive. “A non-qualified worker who starts at the plant gets $17.11/hour,” says Virginie.

The Lac Saint-Jean area, like so much of Quebec, is lacking manpower. The shortage of workers was a key issue in the last provincial election in the fall of 2018, and many observers feel former Quebec premier, Philippe Couillard, who represented the region in Parliament, lost his seat partly because he could not address the issue.

“Some people are against immigration, but at the same time we need workers as our population is growing rapidly old,” says Virginie’s sister Valerie. She is considering hiring foreign workers but they would need to get work permits. And then, there is the language problem. For example, she says, “the whole quality system control of the processing plant would need to be translated into Spanish.”

Ironically, the booming demand for oat flakes comes not only at a time when there is a shortage of workers but also when the Lac Saint-Jean area’s oat production is falling. The oat harvest has dropped from 57,100 mt in 2011 to 19,500 mt in 2017, according to the Institut de la statistique du Québec. In that the same period, the provincial acreage dropped by half.

“The only way to stop this trend is to get a fair price for the producers, for us and for the end users so that everybody gets a fair share,” Virginie says, adding that she had to bring in 3,000 tons of oats from Western Canada to meet the demand.

New cash crops such as soybeans in the area are competing with oats, which command $200 per tonne, and twice this price for organic grain.

In their 2018-25 business plan, the Lepages are considering farming half their land with organic grains, and possibly adding a grain screening centre to the existing facilities.

“We certainly don’t lack projects, but my responsibility is to make sure that we have the income to pay back our investments and keep our employees,” says Virginie. By 2025, her parents will have fully retired, and as new CEO, she will manage the farm with the help of her siblings.

Mind you, from time to time, you still might have go to the plant to find her.

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