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How do independent grocers beat the big guys on produce prices? The answer is surprising


Entrepreneurs

How do independent grocers beat the big guys on produce prices? The answer is surprising

Surrounded on all sides by heaping piles of fresh, vibrant produce — berries, apples, squash — the picturesque Kensington Fruit Market with its green-painted facade is a sharp contrast to the vast and sterile aisles of the city’s large supermarket chains.

The brisk, autumn air rustles falling leaves around neatly stacked, bright orange pumpkins and seasonal root vegetables, making this trip to the grocery store feel like less of a chore and more like a leisurely fall outing.

But it’s not just the charming atmosphere that brings customers to the neighbourhood gem. Wedged in between a mound of avocados at the family-owned independent grocer is a handwritten sign: “99 cents each.”

On that same day, a single avocado at Loblaws would cost you $2.49. At Metro, it’s two for $4.

Despite a perfect storm of crises facing the food industry, including labour shortages, rising inflation and skyrocketing fuel prices, the city’s independent grocers have kept shelves fully stocked and prices low, often undercutting the large grocers. And Torontonians are taking notice.

“We don’t have an expectation of making a ton of money,” said Linda Vieira, co-owner of the Kensington Fruit Market, which has been serving customers in the heart of Toronto’s famed Kensington neighbourhood for more than four decades. “We just want to keep the family business running as long as we can.”

But their secret to keeping prices low goes far beyond an entrepreneurial spirit. Maintaining affordable prices often means daily trips to the city’s largest farmers market, using unwanted produce from the big chain supermarkets, and keeping overhead costs low.

To market, to market

Like Vieira, Giancarlo Trimarchi, president of independent grocery chain Vince’s Market, wakes up before sunrise most days to get his produce from the Ontario Food Terminal, often described as Ontario’s stock market for fruits and vegetables.

The Ontario Food Terminal is a 1.7-million-square-foot facility in Toronto’s west end, and is the city’s main produce distribution centre and the largest such facility in Canada, handling more than two billion pounds of food a year.

Every day more than 5,000 buyers like Vieira and Trimarchi descend on the terminal, making deals with some 21 wholesale dealers and farmers who sell in-season produce.

“The Ontario Food Terminal is the bulk of our business. My dad’s been buying from the terminal for over 45 years,” said Trimarchi, who is also chair of the Canadian Federation of Independent Grocers, which represents more than 4,000 independent, franchised and specialty grocery retailers across Canada.

Vince’s Market — established in 1929 and with four locations in Sharon, Newmarket, Uxbridge and Tottenham, Ont. — and Kensington Fruit Market both get the majority of their produce from the food terminal, and boast decades-long relationships with the farmers there.

“Where we’re able to differentiate and compete would be in what we call the fresh departments, which starts with produce and includes the bakery and deli,” Trimarchi said. “What independent grocers do really well is they go to the market, not to necessarily always find the best produce, but to find really good produce that they can get for a really good price or deal.”

Supermarkets have the upper hand when it comes to keeping costs low on basic goods like eggs and milk, Vieira conceded. Independent grocers often have no choice but to buy grocery supplies directly from their competitors, Loblaws and Sobeys, which own the two biggest food wholesale distributors in Ontario.

“It’s very hard for us to compete on name-brand products because we’re ordering them from our competition. One of our main grocery suppliers is one of the chains,” said Christy McMullen, board member of the Ontario Food Terminal and vice-president of Summerhill Market, an independent grocer that first opened in 1954 and now has multiple Toronto locations.

On the flip side, the large supermarkets “have to advance-book their product with growers from all over the world because they need so much of it and because they have so many stores that if they don’t, they’re going to be scrambling,” Trimarchi said. In other words, the big chains have to pre-order their produce from farms and suppliers weeks and months in advance and in large quantities.

This gives independent grocers an advantage because prices at the terminal are based on the quality and quantity of produce available that day. Because independent grocers pick and choose products daily, they can make the decision to buy imperfect produce and sell it in a smart way.

“If we see some lax strawberries for example, we know that we can get it for a really good price because their market value has dropped significantly. Then we go through them one by one, throw out the bad ones and take the good ones and use them in our bakery,” Trimarchi said. “And we probably make more money on a lot more of the product that way than by just buying beautiful strawberries and selling them at a regular price.”

The ‘dumping’ factor

The food terminal also sells rejected loads from chain supermarkets at a much cheaper price — produce that supermarkets return to suppliers who then sell it at the food terminal, in a process known among independent grocers as “dumping,” according to Trimarchi.

“For the most part, supermarkets return produce because they might not like the size or the quality of something, or maybe it was too much product they didn’t need, or the colour was not what they wanted. Then the produce would go to the terminal,” said Summerhill Market’s McMullen.

“So those avocados you found in Kensington might have been smaller than what Loblaws would take.”

“At the end of the day, it’s better than dumping produce in the garbage. Independent grocers who are willing to take the risk and have knowledgeable staff willing to work on selling the produce at an affordable price and to hustle and be entrepreneurial can use this to their advantage,” said Trimarchi.

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But the food terminal alone is not enough for independent grocers to maintain affordable prices while also staying afloat.

Keeping overheads low

Kensington Fruit Market’s Vieira has often had to make the decision to pocket less profit and absorb costs to maintain affordable prices on produce because of steadily climbing and unpredictable prices.

For Vieira, rising rent is not a concern because her father owns the building. It’s one way she manages to keep overheads low.

“Prices have gone up significantly over the last few years and especially since the pandemic, they haven’t stopped going up,” Vieira said. “We try to absorb some of it where we can and then try to wait and see if prices come back down to normal, because fruits and vegetables fluctuate a lot and it depends on availability and demand.”

On Thanksgiving weekend, the price of herbs, which mainly come from Florida, shot up due to the impacts of Hurricane Ian on Florida’s crops as well as high demand from Canadians making turkey dinners.

“We decided to absorb the cost. So, if we have been paying $12 for 12 bunches of herbs and this week they cost $14 at the food terminal, instead of hiking the price for consumers I still charge the same price as before,” Vieira said.

The family-run business, which she co-owns with her husband, sister and brother-in-law, is small, so they don’t need to hire many employees.

“We do most of the work. Our shop isn’t that big, plus labour is very expensive right now,” Vieira said.

This allows the fruit market’s owners to be flexible with their own pay if business is slow or supply is not ideal.

“We pay ourselves when we can, but we don’t have to pay ourselves today or this week, so we can decide when. There have been times when we don’t pay ourselves for a few weeks and that’s OK,” Vieira said.

McMullen also said Summerhill Market owns its buildings, giving the business more independence.

“We’re not paying high rent so we don’t have to make that up in our process,” McMullen said.

Trimarchi of Vince’s said independent grocers have to be creative and find deals to keep costs low.

“Oftentimes we have to margin down and figure out how to make it work. And we have to be entrepreneurial. We are out there looking for deals and hustling and negotiating hard,” he said.

Fair game

In the meantime, grocers and food manufacturers agree their industry needs a mandatory and enforceable code of conduct to ensure fair dealings between grocers and food and beverage suppliers.

There are approximately 6,900 independent grocers in Canada, many of whom operate on overall margins of 1.5 to two per cent, meaning they’re making little profit, said Gary Sands, senior vice-president of the Canadian Federation of Independent Grocers.

“There’s a real squeeze going on and of course costs being swallowed by the independent grocers. There’s an increase in milk, bread, eggs and produce. They keep adding up on top of all the other supply chain pressures,” Sands said. “Affordability is not just an issue for the consumer. It is a concern for the independent grocer as well.”

Sands is advocating for the implementation of a code of conduct to help level the playing field and ensure independent grocers are supplied fairly by wholesalers like Loblaws and Sobeys.

“If a company is both a retailer and a supplier and a product is in short supply, who’s going to get priority for that product? Is it going to be the independent grocer or is it going to be their own stores?” Sands said.

Trimarchi hopes consumers make it more of a habit to support and shop at independent grocers.

“If you only ever shop at chain stores, the likelihood that you’re going to shop at the independent is actually very low, because it’s not a part of your experience. And that’s the unfortunate truth for Ontario because of the dominance of supermarkets,” Trimarchi said.

“Once people know what their independent grocer can offer, I hope that experience can convince them to shop there more often.”

Ghada Alsharif is a Toronto-based staff reporter for the Star. Reach Ghada via email: galsharif@torstar.ca

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