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Sharing distribution costs could help artisan food producers grow

The retail food industry has for years been dominated by well-established brands, but more recently that has been interrupted by the discounters. They all have deep pockets to spend on marketing and distribution. They have the economies of scale to ensure they have the distribution reach and the cost base to profitably service the four corners of the country. In such a crowded and competitive market, how does an Irish artisan food producer cope?

According to Teagasc, the production of speciality food in Ireland accounts for a €500m a year from a base of approximately 300 producers. For artisan food producers, being sufficiently relevant so that retailers will give them space is an ongoing challenge. I take my hat off to those retailers who support and give them the opportunity to build their business.

Now those retailers are not charities and they expect to be able to sell all goods at a fair price, at a fair margin and in sufficient volume to justify the allocated space. That pushes the challenge back up the supply chain and it means that all producers have to perform. That usually means having a niche and a marketable product that sells out the door repeatedly. And doing that in a cost-effective way is not easy when you consider limited scale, short shelf-life, costs, etc.

A niche for most artisan suppliers comes from producing premium products that collectively give Ireland the international reputation for great quality. It makes me very proud when I see Irish brands on display on my travels.

Kelly’s of Newport, Artisan Butchers

If you were asked who the first Irishman to be knighted by the Brotherhood of the Black Pudding was, would you even know that such an organisation existed? Sean Kelly of Kelly’s in Newport was awarded this strange title. He and his brother Seamus have also won many other quality awards over the years.

Now employing about 30 staff, they are custodians of an 88-year-old family brand of artisan butchers in Newport, Co Mayo. Situated 19km west of Castlebar, they have a reputation for ‘making up to a standard, not down to a price’. In addition to the butcher shop, they have a newly opened restaurant next door that is capitalising on the extra tourists drawn to the Great Western Greenway. They have their own abattoir for beef and lamb and 80pc of that is sourced from their own farm.

Sean, Seamus and now a third generation – Kenneth, Cormac and Shauna – have developed a niche range of speciality sausages along with black and white pudding. Flavours include pork with garlic or leek and lamb with redcurrant.

Behind their quirky character and wit, there is a very astute business acumen and they have successfully achieved listings with some major retailers in Ireland and the UK.

Recent Challenges
Pudding has a three-month shelf life, so distribution is not a problem. Sausages however have a challenging 14-day shelf life. The big stores that are listing the Kelly’s range such as Dunnes Stores, are in Dublin. That too is where the volume is.

Furthermore, for any producer wanting to sell to the big companies they have to adapt to their needs. For example, Dunnes in Cornelscourt is a massive store. Goods with short shelf life have to be delivered direct to store before 8am. But even for other big retailers that have central distribution, short shelf-life is still a challenge for the producer.

Dublin is 250km from Newport which means the refrigerated van leaves at 3am twice a week. Keep in mind too that pudding and sausages are small items, so undoubtedly the van is carrying a lot of the fresh Atlantic air from Newport to Dublin – and returning totally empty. That is a big ongoing cost that impacts on margin, especially at the start of the business relationship – until the volume grows. I have no doubt that this issue resonates with artisan producers all over Ireland and finding a practical solution within cost constraints must be a big win for them.

Collaboration

My immediate thought was to freeze the products, although Sean will not do that as he feels it negatively impacts the quality of his fresh product. Nor is there a cost-effective refrigerated delivery service available locally. A further thought came to mind which I’ve seen in large corporates around the world – it is that non-competing complementary organisations of all sizes are collaborating more and more.

It is already working for an Irish agent selling Irish produce in Dubai. Several artisan producers from all over Ireland currently send their goods to a factory near Dublin. From there, they are repacked in chilled boxes and flown daily to Dubai. That even includes strawberries, which have a shorter shelf-life than sausages.

There have to be other producers in the west of Ireland particularly on the N4 corridor with similar challenges. Instead of a number of half-empty vans heading in the same direction, what if producers were to come together in a collaborative way to share the cost?

If it works for shipments to Dubai with an added eight-hour flight, why can’t it work within Ireland? It just takes a character like Sean to initiate and lead that idea in Mayo.

Summary

There are thousands of small businesses in Ireland across all industries, challenged with achieving margin in the absence of scale. By reaching out through our industry federations, business groups, chambers of commerce and state agencies, I have no doubt that there is a high willingness to collaborate, not just for distribution. All it requires is an openness to share and talk.

Article Source: http://tinyurl.com/kbwqb42

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