Innovating and delivering a resilient Alberta food system: snapshot of The Organic Box

With a pilot in 2009 and official opening in 2010, Edmonton-based The Organic Box was started by CEO Danny Turner and his farming family with the aim of providing a direct market between local producers and consumers. Initially a home delivery service to market products from Turner’s own farm, the Organic Box is now an Alberta-wide operation that brings farm fresh products to consumers, restaurants, businesses, and distributors in multiple municipalities. Despite this province-wide expansion, The Organic Box has remained faithful to its objectives of providing high quality, fresh, organic, and local foods. Currently, the Organic Box sources from approximately 150 producers, has 35 permanent employees, a fleet of delivery vehicles, and a high-tech processing facility. With innovation and scaling up strong themes in FLEdGE research, this snapshot, informed by founder and CEO Danny Turner, will outline how The Organic Box enhances and innovates the regional Alberta food system, and the challenges and opportunities implicit in this role.

BACKGROUND

Farming cherries, apples, pumpkin, asparagus, watermelon and more, Turner’s family farm is based out of Creston, BC. One of his initial motives for starting the Organic Box was the desire to find a better way to distribute farm-fresh products to consumers. As Turner notes, there are “only 18 [farmer’s] markets a year and if it rains, nobody comes. [The Organic Box] is a 52 week a year program where we have sales booked months in advance”. For each delivery, customers have the ability to go online and not only select what size of Organic Box they would like, but also what products they would like to be in that box depending on their tastes and preferences. Starting out, the delivery service was primarily for individual consumers in Edmonton, but the organization has since expanded, acting as an access and delivery point for fresh, local foods to be distributed to restaurants, grocery stores, other businesses, and distributors across Alberta.

The Organic Box is carefully positioned within the regional Alberta food system to connect producers and consumers, allowing farmers to directly market their products to consumers without the considerable overheads and production quotas associated with grocery stores. In this sense, The Organic Box serves as a food hub, bridging the gap between production and consumption, allowing for a more transparent supply chain. Each of the vast array of products are clear in their origin and attributes. Because a majority of the food processed and distributed by The Organic Box is from local Albertan producers, inherent within the organization’s operations is the encouragement and strengthening of regional food systems. A part of The Organic Box’s success over the past 7+ years of operations can be attributed to the solid relationships and overall producer-consumer network that have been cultivated and established. These relationships extend beyond those established between The Organic Box and local producers, also including various businesses, restaurants, and distributors. With the idea of networks, the Organic Box also belongs to a variety of organic initiatives: such as the Prairie Organic Grain Initiative, Organic Alberta, Canadian Organic Growers, Pacific Agricultural Certification Society, Pro-Cert Organic, Certified Organic Association of BC, Canadian Organic Trade Association, the Organic Federation of Canada, the Organic Value Chain Roundtable, among many others. The partnerships are strong and numerous, yet networking and knowledge sharing amongst food actors are are slowing down in the current economic climate of the province. Knowledge sharing is something that typically happens when people have surplus time and energy, and Turner notes that “right now everyone is very focused on survival”. Farmers are focused on maintaining their farms as opposed to networking. With this challenge in mind, the following section will discuss present challenges facing The Organic Box.

A TOUGH ECONOMY POSES CHALLENGES...

Despite the strength of the networks and relationships that The Organic Box has built, the organization is not immune to challenges. These challenges are similar to those facing many other regional food producers, consumers, and retailers, and come from competitive, political and economic sources.

Competition for The Organic Box comes from both mass market operators and comparable organizations. Mass market operators such as grocery stores are increasingly becoming a competitive force as they move more into the organic food space, with organic foods a continual consumer priority. In addition, the home delivery services beginning to be offered by select grocery stores are also a force of competition to The Organic Box’s home delivery service. Another large competitive threat for local producers is the mass importation of cheaper American food to Canada. Turner notes that “it’s very hard for us to be competitive with [the American] market that grows 48 weeks a year at the scale that they grow at, when we do 18-20 weeks a year at a much smaller scale”. This is a challenge not just facing The Organic Box, but Alberta regional food systems as a whole. Furthermore, for The Organic Box, competition with comparable organizations also occurs: companies that offer similar products and services to The Organic Box. One such company that operates in Edmonton and Calgary is SPUD, a Vancouver-based food delivery “grocery store on wheels” company that, like the Organic Box, emphasizes a commitment to fresh, local, and organic products. According to Turner, this competition is positive, and SPUD helps pressure The Organic Box to do better.

In addition to these competitive challenges are political challenges: increasingly, the regulatory environment in which the Organic Box operates means that both the top and bottom line of the business are impacted. Turner notes that like many small businesses in Alberta, the Organic Box experiences a “squeeze in the middle”, effect to some extent, where it is forced to reduce prices due to competition but also has to pay increased taxes. This can mean getting caught between the small scale producers and the grocery stores engaging in a race to the bottom on prices. This effect is exacerbated by recent changes in Alberta such as tax increases and the proposed establishment of a “living wage”. This increase in minimum wages, according to Turner, will “bring the whole cost structure of the economy up, for all workers”, meaning that The Organic Box will have to compete more for labour.

The current Alberta economy also poses challenges to the organization. In general, the lower amount of consumer disposable income puts the food industry under greater pressure. A weaker economy means that province-wide, jobs within and external to the food system are less secure, and so consumers are increasingly holding onto their money due to the uncertainty that the future holds. And 2017 might be the last of the worst, at least in terms of economic challenges. Turner notes that getting past this year (“the bloodletting year for this industry”) will show which businesses can make it. Although many producers and retailers have already suffered, Turner feels optimistic for The Organic Box, noting that “we’ll come up the other side… our goal is to find every penny that we can and take it out of the business, and make sure we’re nice and well-capitalized and strong. If we’re cash flow positive in the bad times then when the good times come we’ll be in a good position.”

Within this somewhat challenging economic climate, it is essential to continuously evaluate how costs can be cut from operations. To make these decisions, Turner carefully considers how consumer values play into how the Organic Box is run. Despite the customer base of The Organic Box generally choosing to put more discretionary income into their food purchasing, overall consumer trends indicate that a very small proportion of household incomes go towards the purchasing of food. This is exacerbated by the food industry’s heavy focus on price reduction; this race to the bottom directly affects The Organic Box’s bottom line, and so strategies to go against this trend are necessary in order for The Organic Box to stay afloat. The following section will discuss innovative strategies the Organic Box is employing to deal with these challenges.

INNOVATION, OPPORTUNITIES, AND FUTURE DIRECTIONS

One such means of cutting out costs is by the investment in and adoption of new technologies to target a large proportion of revenue into the “back end side” of business. Currently, a new automated, computer-assisted picking system for assembling orders is being put in place, and according to Turner, it is the most innovative thing the Organic Box is currently doing. With funds from Growing Forward 2, a national agricultural subsidy, The Organic Box is installing this automatic picking system that will use a system of lights and headset guidance to automate a lot of order picking, allowing the organization’s employees to focus on quality and completeness as opposed to more manual work. This allows The Organic Box to reduce its expenditures on the less-skilled labour of order picking. Because customers attach little value (have little to no willingness to pay) to picking of orders, this allows The Organic Box to focus more on what customers do want.

This focus on determining what consumers want is made easy for The Organic Box largely because they are on online retailer. According to Turner, “one of the advantages of being an online retailer is that we have 100% of the data about our customers so we can use it to understand what’s going on in the market. So I know exactly what everybody’s bought and when they bought it and how much they paid for it and how much we paid for it, right down to the unit. So we can do that kind of analysis.”

In terms of future directions for The Organic Box, Turner does not see the business expanding beyond Alberta anytime soon due to their local focus, along with wanting to avoid the complexities (federal regulations and requirements) of moving operations to other jurisdictions, such as cross border to other provinces. In order to ensure the Organic Box’s long-term financial sustainability, Turner describes attacking both the top and bottom line of operations. This means driving volume into the business while also taking costs out of the business. The support from Growing Forward 2 has helped The Organic Box in regards to market development and expansion, followed by the direct technology (assisted picking) currently being installed. Going forward, The Organic Box aims to use the support of Growing Forward 3 to simultaneously increase energy efficiency and reduce costs via conversion of sodium lamps in its facilities to more efficient LED’s.

Overall, despite a challenging economic climate and strong competitive forces, The Organic Box continues to innovate and adapt its business strategies to changing conditions. Its position between producers, consumers, and other retailers and distributors makes it a unique case of a food hub that can help in the bridging of often expansive distances between farm and fork. Through the networks that it not only is a part of, but has also created, The Organic Box strengthens the economic, social, and environmental sustainability of Alberta’s regional food systems, allowing for a more resilient future.


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