How Canadian restaurants and foodservice operations are keeping up with the local food movement

By Geoff Wilson, fsSTRATEGY Inc.
July 5, 2012
How restaurants can create and market healthy snacking options

It used to be that when you asked a public school student where food comes from, invariably the answer was, “From the grocery store.” That’s changing as our education system is now addressing sustainability and environmentally responsible behaviours. The question is: is the foodservice industry changing too?

It’s no secret that consumer interest in healthy eating, local food and environmentally responsible business practices is growing. Consumers are demanding more authenticity in the foods they eat, as well as becoming more interested than ever in the story behind the food. This sophistication in terms of food knowledge has grown due to easier long distance travel, access to information over the internet, immigration and, of course, the Food Network.

A variety of government agencies and interest groups have been urging the use of more local food products in the retail grocery and foodservice industries. In Ontario, the Friends of the Greenbelt Foundation (“Greenbelt Foundation”) is funding projects to promote the sale of Ontario food products in foodservice in the broader public sector (i.e., healthcare, education, correctional and government facilities). fsSTRATEGY undertook a study for the City of Toronto, funded by the Greenbelt Foundation, that measured the use of local food (defined as being grown in Ontario) in City of Toronto foodservice operations and strategies to increase the use of local foods.

To be sure, the demand for healthy eating, local food and environmentally responsible business practices must be taken in perspective. Mainstream consumers are still interested in value when they eat out. Regardless of where you look, consumers are not generally prepared to pay significantly more to eat local. And when it comes to healthy eating, consumers often like to spoil themselves when they dine out.

Supply chain capabilities

So if there is growing demand for local foods, how is the foodservice supply chain responding?

Our research found that, while it is possible to procure some food supplies from local growers, the foodservice supply chain has yet to be able to facilitate significant levels of local-food purchases in a way that satisfies the highest food-safety inspection standards and at competitive prices across the board. The ability to source local foods is expected to grow slowly and selectively over time, but in response to market demand.

Across Canada there are entrepreneurial, niche growers and processors (e.g., Spring Creek Ranch, The Little Potato Company,  Riverbend Plantation, VG Meats and Pine Valley Farms) that are interested in supplying local foods to the foodservice industry. The trend toward the use of more local food is certainly supportive of the local economy and environmental stewardship.

The food-supply system is also starting to adapt. Gordon Food Service, Sysco and other distributors now issue lists of local products available in their regional warehouses. Moreover, distributors are now adding province of origin fields in their inventory management software systems. Gordon Food Service recently launched its own private label Ontario’s Choice lasagna made by Jiano Foods of Toronto.

You could also market snack choices that use more whole grains, natural, fresh ingredients or key nutrients needed for health. Consider the success of Chipotle restaurants, despite having many menu choices that are high in calories and fat. Healthy food is also defined by some as food that is grown and processed with a commitment to sustainability. What can you stand for that health advocates will appreciate?

Marketing permission to indulge

Given the Canadian climate, however, local isn’t always an option when it comes to meeting consumer demand and keeping up with the latest menu trends.

“Consumers have now come to expect all varieties of fresh produce to be available to them at all times,” says Megan Hunter, communications manager at Friends of the Greenbelt.  “As a result, the menu planning and procurement practices of restaurants and foodservice companies have lost capacity to incorporate local foods. Seasonality needs to play a part in both of these critical aspects of the business. Food distribution networks are no longer geared towards regional, or local, consumption and this can be a big challenge for many foodservice operations.”

Barriers to the use of local foods in foodservice include :

  • Industry consolidation – Over the years, the operator and distributor sectors in the foodservice industry have seen significant consolidation. In Canada, two major national foodservice distributors exist. Chain foodservice operators comprise over 50 per cent of foodservice industry sales. National distributors and operators buy for operations across the country, consolidating massive contracts for national volumes to deliver best value. Local food does not fit easily into this equation.
  • Level of inspection – Foodservice operators traditionally have historically insisted on purchasing food from federally (as opposed to provincially) inspected meat and food processing plants, even though provincial inspection may be quite thorough. Such parties believe that federal inspection provides a higher level of protection in the event of food-borne illness. The cost and process for a local-food processor to gain federal inspection status can be quite onerous.
  • Lengthy product approval processes – Foodservice chains have lengthy processes to explore, test and approve new products. Small-to-medium size local food growers and processors don’t necessarily have the resources or patience to work though these processes. The hit can be large but the journey is long.
  • Cost – While locally produced food doesn’t always cost more, small-to-medium sized food growers and processors don’t necessarily have the scale to compete on price. Larger food processors are not always willing to source local and out-of-province versions of similar products to prepare their products. In the highly competitive foodservice industry, operators are reluctant to pay for local food products if they cost more. In public sector foodservices, foodservice budgets are constrained by public policy and limited resources.
  • Warehouse space Distributors have fixed warehouse capacities. To gain a slot in a warehouse, a product has to have the power to displace another by outselling an existing product. The volumes inherent in the local food concept are naturally smaller than those for national products.
  • Trade agreements – While it would be desirable if government procurement agencies purchasing food for government facilities (i.e., correctional facilities) would favour local products over those from out-of-province, this can put them in the position of violating inter-provincial and international trade agreements.
  • Local food definitions – Many definitions of “local” food exist, ranging from 100 miles to origin within a province, to the entire country. Foodservice distributors cannot hope to satisfy every operator’s definition of local.
  • Where does it come from – Foodservice distributors experience significant challenges in finding out where ingredients in processors’ foods come from to prove a product is local. Many processors vary the source of ingredients based on best price and seasonal availability.

Operator response

Despite the potential barriers to the increased use of local foods, many foodservice operators are using local-food menus and sustainable business practices as a key characteristic of their brand. The Ontario government promotes such restaurants and vacation dining locations through its Savour Ontario program. Alberta’s Dine Alberta program is promoting restaurants that offer regional cuisine. Similar promotions and organizations also exist in other provinces, including Farm Folk-City Folk in British Columbia.

“Promoting the use of local ingredients on a menu shows the customer that you care about your community, that you are supporting your local farmer and that you are investing in the future of local food in your region,” says Bonita Jo Magee, project and events manager for Farm Folk-City Folk in Vancouver. “Good food isn’t cheap. The same goes for good ingredients. It’s important to let your customers know, via your menu text, that you are using local products.”

Into the future

The local food movement is clearly a growing opportunity for foodservice operators. The foodservice supply chain will respond as it is now but the pace of change will continue to be driven by consumers and operators. The economics of local food are likely to improve but in general, consumers are unlikely to be willing to pay more for local foods. The opportunities for operators to meet this price sensitivity are to provide an enhanced customer experience (i.e., local food, local inn) or demonstrate a quality difference for the price paid. The secret to employing local food is tapping currently available local-food supply-chain options, demanding more from the supply chain and using local food strategically to differentiate the foodservice establishment in the market.

For the foodservice industry across Canada, the local-food movement is an opportunity to establish an even more distinctive Canadian identity.

See also:

About the author

Geoff Wilson is president of fsSTRATEGY Inc., business strategy consultants to the foodservice industry. Visit them at fsSTRATEGY has helped to develop almost 50 new local products using the value-chain approach in Alberta, Saskatchewan and Ontario. The value-chain approach identifies strategic foodservice operators and processors and pulls the product through the supply chain by focusing on a new market opportunity or solving an operational problem for a foodservice operator.

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