If anybody is skeptical about direct marketing, it should be Sylvain Charlebois. After all, he’s built his career on the marketing of ag commodities. Not only that, but as associate dean of the Johnson-Shoyama Graduate School of Public Policy, a joint venture of the universities of Saskatchewan and Regina, Charlebois is also situated right in the middle of Canada’s low-population, high-productivity Prairies.
Yet Charlebois sees this decade’s rapid local-food sales growth as the tip of the iceberg, with huge market potential still untapped.
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To see why, he starts with an economics lesson. Charlebois classifies the current model of food marketing as a pull strategy. That is, farmers produce as much of a commodity as cheaply and efficiently as they can, and then hope that market demand “pulls” it out of their bins and barns.
A better model — and one that small producers and local food enthusiasts are beginning to explore — is the push strategy, like the model the food industry is exploring, where the battle on the grocery shelves is to make their products anything but commodities.
The key, says Charlebois, is to identify consumer trends and preferences and then create products that meet these preferences and fill those needs.
Retailers learned this lesson years ago, and the result over the past couple decades has been a complete reversal in the way the food industry works — and who garners the benefits of it, Charlebois says.
“Private labelling came to Canada only about 20 years ago,” Charlebois says. “Now more than 40 per cent of the food products we consume are private (store) labels. Why so many? Food retailers saw the opportunity to increase their profit margins.”
By seizing the lead and creating new brands that met new consumer needs, these retailers shifted the industry’s power balance in their favour. Then they matured and grabbed even more profitability. They may have started with bare-bones products in black and yellow packaging that met bare-bones consumer criteria, but today, many food chains are executing very sophisticated marketing strategies that establish their own brands across a full range of price points, including premium categories.
Now, new market niches are appearing, Charlebois says, and these could offer great opportunities for farmers, likely through vertical integration models that would see farmers and retailers working together to meet new market demands.
To get those profits, however, farmers will need to do their share of the heavy lifting. They’ll need to become actual marketers, doing more than simply dumping their crops in the elevator pit or shipping their animals to the slaughter plant and then walking away.
It’s going to require thinking of things differently — something the Canadian industry hasn’t been great at, Charlebois says. “Frankly, we’ve been too lazy to figure out new models.”
Charlebois points out that while consumers in recent years have been buying more and more packaged and prepared foods, almost all of them come from the U.S.
So, he asks, now that consumers are beginning to express more interest in fresh, local food and healthy choices, will those markets be grabbed by Canadian producers and food processors? Or will imports continue flooding in from the U.S., with its tradition of innovation, or from Europe, where the food system is already more attuned to this groundswell of consumer sentiment?
“I was in Italy recently, and in a grocery store there I saw a product that included all the fresh ingredients required to make a minestrone soup, with directions on the package, for a family of four,” Charlebois says.
“We’ve got to start thinking of what the consumer needs. But in Canada, we’re not there yet. There’s this culture of inertia in the food industry.”
Frustrated by this inertia, Charlebois says “small pockets” of consumers are beginning to drift away from the established food system and experiment with their choices, and their numbers are growing every day. For example, organic food has been increasing at double-digit rates for years and it even grew at about six per cent in 2008, after doubling over the previous five years, to a total global worth of US$22.75 billion.
Likewise vegan (containing no animal products at all) and local food have also seen large growth — and Charlebois bluntly says the food and agriculture industry had better get used to it, because fantasies that the recession will derail this shift in consumer preference are just that — fantasies.
“Oh, no, it’s not going to go anywhere because of the recession,” Charlebois says. “I think it’s here to stay and it signifies that consumers are much more informed now than they’ve ever been before.
“They’re looking things up on the Internet and learning much more about how their food is produced, and that’s a good thing. But when they start drifting away, you know that they feel they’re not finding the answers and solutions that they need.”
Winnipeg consumer John Toone echoed that sentiment when he spoke to Country Guide. Toone describes his generation as less and less trusting of slick marketing pitches that don’t back up the pretty words and images.
“I don’t want somebody to spend a whole pile of money on a slick campaign to convince me that Proctor & Gamble is a great company,” Toone says. “Consumers are getting a bit more savvy.”
Over the next 10 to 15 years, the solutions that customers like Toone eventually settle on might not look anything like the solutions they’re experimenting with today, Charlebois says, but because consumers are more curious, motivated and better informed there will be new demands — and opportunities.
